Flexible Spending Account: Don’t Forget to Update it When You Have a Baby

by PT | Print Print |

You usually get to adjust your flexible spending account only once a year, when your company has it’s benefits enrollment sign-up. It can be tough to figure out your health expenses but it’s worth the tax advantage. (You do contribute to your flexible spending account, don’t you?).

But what happens if you discover you’re expecting after your enrollment period passes? Your health expenses will most likely be going up and it would be nice to adjust your flexible spending allotment.

You’re in luck!

There are a few situation in which you are allowed to change your election after the enrollment period ends. This includes marriage, divorce, and having a baby (or adoption).

How does a flexible spending account work? What are the advantages?

With a flexible spending account you determine an amount that you will be using for eligible health and medical expenses for the year.

This amount then gets deducted from your paycheck on a pre-tax basis (your gross pay). Not all at once mind you. It’s divided amongst all of your pay periods for the year. What’s important to realize here is this money isn’t taxed which is why this is such a great benefit (it lowers your adjusted gross income)!

As you incur eligible expenses you can apply to the company that handles your FSA to get the money back. Usually a receipt is used as proof. With my company’s provider I can fill out the form online and upload PDF’s of the receipts. It doesn’t get much easier (check with your HR/Benefits department to learn what your company system is).

Important note: The flexible spending account money is Use It Or Lose It! If you don’t use the account money it’s gone so make sure you figure out a somewhat conservative estimate of your expenses. Also make sure you apply to get the money back. Some company plans allow you until March of the next year to declare your expenses.

A flexible spending account is a nice way to maximize some tax advantages and save you some money. With a new baby arriving you want to save all that you can!

This post comes from FFB of the excellent personal finance blog, Free From Broke [RSS]. FFB has two kids of his own and has kindly offered to share this timely advice on Flexible Spending Accounts.

Related posts:

  1. How Much Do You Contribute to Your Health Care Flexible Spending Account?
  2. Save Money on Health Care: A Quick Summary of Tax Advantaged Medical Savings Accounts
  3. How is Your Spending? – Your Mid-Year Financial Check-Up #1
  4. Can You Afford a Baby?
  5. Update: More $25 ING DIRECT Savings Account Bonuses!

  1. 3 Responses to “Flexible Spending Account: Don’t Forget to Update it When You Have a Baby”

  2. By Nate @ Debt-free College on Mar 2, 2009 | Reply

    Great post! Thanks, I will have to check your blog!

    Thanks,
    Nate


  3. By FFB on Mar 2, 2009 | Reply

    Thanks for the opportunity to guest post and congrats on the new addition!


  4. By Scott @ The Passive Dad on Mar 4, 2009 | Reply

    The first year it seems like we went to the doctor every couple of months and the copays add up quickly. We did not budget for the new addition and payed out of pocket for most deductible expenses.


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