Why Every Federal Employee Should Have a Flexible Spending Account (FSA)
Flexible Spending Accounts (FSAs) provide a way to shelter even more health care spending from taxes. FSAs allow you to shelter the out-of-pocket costs that you incur for copayments, coinsurance, deductibles, charges above customary and reasonable, and uncovered health care expenses. And, in accordance with the CARES Act signed in 2020, over-the-counter medicines or drugs are eligible for reimbursement without a prescription from your doctor. You can find out if a health care expense is eligible for reimbursement from a FSA here. For most people, the favored categories for using FSAs are dental expenses, vision expenses, and your share of costs for services covered by the plan—for example, the coinsurance you pay for mental health services, or the annual deductible.
Under IRS rules, you must set up your FSA account and amount in advance. OPM allows you to use the regular Open Season period for setting up your account. In 2022, you can elect to choose any amount from a minimum of $100 to a maximum of $2,850. (You can also elect to set aside additional amounts for Dependent Care.) You establish the account by enrolling online at FSA Feds or by calling 1-877-372-3337. Unlike Premium Conversion, you have to proactively enroll in this benefit and will NOT be enrolled automatically. Until recently, enrollees in Consumer-Driven and High Deductible plans were not allowed to create FSAs. However, Limited Expense FSAs (LEXHCFSA) are now available that cover only dental and vision expenses not reimbursed by the FEHB plan.
For 2022, you can carry up to $570 in unused FSA accounts into the next year. You should plan carefully based on your best "guesstimate" as to health care expenses that you are virtually certain to incur, such as maintenance prescription drugs, routine dental care, and routine eye care or any services for which you make multiple and foreseeable provider visits.
Important update—As a result of relief provided by the American Rescue Plan Act, if you have a FSA for the 2021 plan year, and you re-enroll in a FSA for 2022, there is an unlimited carryover of unused FSA funds from 2021 into 2022. Also, the 2021 grace period to use those rolled over funds and file a claim is extended through December 31, 2022.
Only about one in five Federal employees are signing up each year for FSA accounts. This means that about four out of five employees are leaving money on the table each year. Almost everyone has at least a few hundred dollars in foreseeable out-of-pocket health care expenses. Those who don't sign up are throwing away a one-third discount on these costs. We recommend that ALL employees who are not in High Deductible plans establish an FSA if they have foreseeable expenses.