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

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.

Join 36,000 subscribers improving their financial life.

Subscribe for free. Get my book (31 Days to Improve Your Financial Life), intro series, and article digest.

Powered by ConvertKit
Last Edited: July 24, 2017 @ 2:09 pmThe content of ptmoney.com is for general information purposes only and does not constitute professional advice. Visitors to ptmoney.com should not act upon the content or information without first seeking appropriate professional advice. In accordance with the latest FTC guidelines, we declare that we have a financial relationship with every company mentioned on this site.
About Philip Taylor

Philip Taylor, aka "PT", is a CPA, financial writer, podcaster, FinCon Founder, husband, and father of three. He created PT Money back in 2007 to share his thoughts on money and to meet others passionate about managing their finances. All the content on this blog is original, and created or edited by PT. Read more about Philip Taylor, and be sure to connect with him on Twitter, Facebook, or Google+. Listen to the new podcast, Masters of Money!


  1. Scott @ The Passive Dad says:

    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.

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

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