What You Need to Know About the FEHB Program and Flexible Spending Accounts
Health Care 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. Under health reform, you can no longer use an FSA account to pay for over-the-counter drugs without a physician prescription (insulin is an exception) but all other categories of expense are unchanged. 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 2019, you can elect to choose any amount from a minimum of $100 to a maximum of $2,700. (You can also elect to set aside additional amounts for "Dependent Care.") You establish the account by enrolling online at www.fsafeds.com or by calling 1-877-372-3337. Unlike Premium Conversion, you have to elect 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, they may now set up "Limited Expense" FSAs that cover only dental and vision expenses that are not reimbursed by insurance.
You can carry up to $500 in unused FSA accounts into the next year. But any amount over $500 that you elect to set aside for an FSA must be spent by the end of the year, or it will be forfeited (a "grace period" of 2 1/2 months is no longer allowed). 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.
Only about one in ten Federal employees are signing up each year for FSA accounts. This means that about nine out of ten 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.