Federal employees concerned with paying for medical expenses and lowering their tax bills may consider a Flexible Spending Account (FSA).
Many federal employees are eligible to enroll in the federal government’s flexible spending program. Contributions to an FSA are pre-tax, which allows a federal employee the ability to pay medical expenses with pre-tax money and lower the amount of income subject to tax.
To be eligible to participate in the Federal Flexible Spending Account Program (FSAFEDS), federal employees must work for an executive branch agency or an agency that offers the Federal Flexible Benefits Plan (FedFlex).
Federal employees have three options to explore before making a final FSAFEDS decision.
1. Health Care Flexible Spending Account (HCFSA)
A federal employee who works for an agency that offers FSAFEDS and is eligible to enroll in FEHB, is also eligible for an HCFSA. This type of account can be used to pay for eligible medical, dental, and vision care expenses that are not covered by the employee’s health care plan.
- Under this account federal employees may save roughly 30 percent on health care expenses.
- This plan also provides access to the account’s full amount on the first day of the FSAFEDS plan year.
- Federal employees who re-enroll in FSAFEDS during Open Season may carry over a maximum of $550 from one plan year to the next.
2. Limited Expense Health Care Flexible Spending Account (LEXHCFSA)
If an employee is enrolled in an HSA-qualified high-deductible health plan and has a Health Savings Account (HSA), one can establish an LEXHCFSA account for savings on eligible out-of-pocket dental and vision care expenses. For more on health savings accounts, see “What is a Health Savings Account?”
- Federal employees may maximize tax savings with a Health Savings Account (HSA) and a Limited Purpose Health Care FSA.
- The Limited Expense Health Care Flexible Spending Account allows an average of 30 percent savings on some out-of-pocket dental and vision expenses.
- Full access is granted to the account’s full amount on the day of the FSAFEDS plan year.
- Federal employees who re-enroll in FSAFEDS during Open Season may carry over a maximum of $550 from one plan year to the next.
3. Dependent Care Flexible Spending Account (DCFSA)
For those with expenses for taking care of loved ones, such as preschool, day camps, or day care, the DCFSA can be used to cover those costs as one continues working.
- Under this particular plan, enrollees may save an average of 30 percent on dependent care service.
- This plan may also reduce taxes as funds are taken from a paycheck and deposited into the account prior to tax deductions.
FSAFEDS Open Season
Open Season to enroll in FSAFEDS is each year from mid-November to mid-December. Enrollment is voluntary, which is why federal employees must elect to re-enroll each year; enrollment will not carry over from year to year. Once elected, enrollments become effective for the benefit period that follows.
There are many options available to federal employees. That is why it is crucial to know what those choices are and how each one will benefit a particular household’s needs. Federal employees will want to speak with a financial professional who can assist them one-on-one when making any informed decisions.
