Wednesday, November 21, 2012
Flexible spending accounts
For many of us it is open season for changing our benefits through work. This year has been different with the layoff. Most of our changes happened right after we got word that GJS would be losing his job and his benefits. He has been added to my medical, dental and vision insurance. But I was leery to sign up for the medical flexible spending account.
In the past, I was part of GJS's flex spending account and it worked out well. At the beginning of each year we received our credit cards and used those to make medical expense related purchases. We used the credit cards for co-pays, prescriptions, contacts and glasses. Sometimes we had to prove a purchase was for a medical expense but most of the time there was no additional follow up required.
Now, with my employer's plan, we will be paying for everything up front and being reimbursed later. I could have signed up to do the reimbursements on-line but with that option, the reimbursements would be delayed. By sending in paper receipts our reimbursements will be direct deposited in our checking account within a couple of days. I felt I needed to go the paper route because we're living on a very tight budget and once GJS's unemployment checks run out (14 more weeks), we may be living off our savings, not even check to check.
The whole reason to sign up for a flexible spending account is to save tax dollars. By contributing to the flex spending account, those dollars are not taxed. We have a pretty good idea of how much we need to put in at the beginning of the year, based on how much we used the previous year, and the contributions are taken out little by little, pay check by pay check. This year we stuck with the $400 allotment. Each pay day $16 and change is taken out of my check and we have access to all $400 at once if we need it. The only catch would happen if I lost my job, then I would be required to pay back whatever amount had not yet been taken from my salary.
It's a good deal any way you slice it. Some programs are more inconvenient than others. But the tax savings are always worth it.