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Suze Orman Money Matters

Suze Orman, Money Matters

Flexing Your Employer Health Benefits

by Suze Orman

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Posted on Friday, October 5, 2007, 12:00AM

The future of how -- and most importantly how much -- Americans pay for health care is getting plenty of attention these days on the campaign trail. But it's just a lot of talk at this point.

Even if any new major health care initiative gains traction during (and after) the presidential election, it'll probably be close to two years at minimum before any meaningful legislation is passed. And no one has a clue what it could ultimately mean for consumers.

It Pays to Be Flexible

So what should you do in the meantime? Well, if you work for a firm that provides health insurance coverage, you're probably about to endure the annual push to get you to decide which benefits to sign up for in 2008.

I urge you to give serious thought to signing up for a flexible spending account (FSA) if your company offers such a plan. According to Mercer Consulting, although more than 80 percent of large firms offer FSAs, just 20 percent or so of eligible employees take advantage of them. That makes no financial sense.

As you no doubt already know, employers are coping with their rising health insurance costs by shifting more of the bill to employees in the form of higher employee-paid premiums, higher co-pays, and reduced benefits. (Translation: You pay for some procedures that years ago were covered by the plan.) And chances are your share of your health care costs are going to continue to rise.

FSA 101

Preliminary results from a recent Mercer survey reports that 56 percent of employers plan to require employees to cover more of their health care costs in 2008. Rising costs can come from any number of changes in your plan: requiring you to pay more of the premium; imposing higher deductibles; boosting the employee co-pay; and raising the annual out-of-pocket maximum you're liable for. Given the trend toward pushing costs on to employees, using an FSA has never been more valuable given the tax advantage offered in most such plans.

Here's a quick FSA refresher course: With an FSA you can have money deducted from your paycheck on a pre-tax basis, which you can then use to cover many health care costs you (rather than your plan) are responsible for. That includes your deductible, any co-pays, and a plethora of "other" types of costs not typically covered by insurance plans, from eyeglasses to orthodontia to over-the-counter medicines.

Even though health care insurance premiums aren't directly payable through an FSA, there's a strategic way to use the FSA to help you deal with premium costs. As with your home and auto insurance, you can typically lower your premium cost by increasing the deductible you're willing to pay. If you then set aside money in an FSA to cover that deductible, you'll be able to pay it with pre-tax dollars.

Tax Advantages Abound

I realize the last thing many of you can afford is to have yet more money deducted from your paycheck; you may feel like you need get every penny of it you can manage into your checking account. But step back and realize that you're stuck paying for these health care costs regardless, and an FSA provides a valuable tax break that can save you anywhere from 20 percent to 40 percent or so.

For example, if you're in the 28 percent federal tax bracket, setting aside $4,000 in an FSA to pay for your family's uncovered health care costs nets you a tax savings of $1,120. Add in the fact that you're shielding that $4,000 from FICA tax (the tax that funds Social Security and Medicare) as well, and your savings will be even more.

Obviously, if you're hit with state income tax, too, using an FSA reduces your state's bite of your paycheck. (And if you have young children in day care -- or an adult who lives with you and you claim as a dependent -- check if your employer offers a dependent care FSA; just like the health care FSA, you can use pre-tax dollars to pay for qualified dependent care costs.)

Rethinking Flexibility

If your reluctance to use an FSA stems from the "use it or lose it" provision, it's time to revisit the topic. While it's still true that any money left in your FSA at the end of the year is indeed forfeited back to your employer, the IRS changed its definition of a plan year for FSAs: Instead of the standard 12 months, most plans now give you 14.5 months to use up your FSA money.

For instance, your 2008 FSA that starts on Jan. 1, 2008, can be used through March 15, 2009. In my opinion, that extra time makes it far easier to assure that you won't leave any money on the table. Even if you get to December 2008 and realize you still have money sitting in the account, you have another two and a half months to drain the account.

Besides, it only takes a little bit of planning to get a good conservative estimate of your out-of-pocket health care costs. For starters, take a look at what you spent in the past year. Then think through any new costs you can anticipate, such as orthodontia or elective surgery. Ask your HR department for a complete list of all expenses that can be paid through your FSA. You may be surprised at all the types of charges that are FSA-eligible. For example, you may be able to use your FSA to cover costs associated with fertility treatments, acupuncture, and LASIK eye surgery.

Another new development is that many employers are issuing debit cards for employees to use when they have an FSA-covered expense. So instead of the old system that required you to pay upfront and then file for reimbursement, you can now pay directly with a debit card. If the paperwork is what kept you from participating in the past, you just lost that excuse.

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  • sjinnc - Thursday, October 11, 2007, 9:45AM ET  Report Abuse

    • Overall: 5/5

    The FSA is the best vehicle available to help reduce your ever increasing medical insurance costs. For the naysayers... get over it. Its should be a fact of life by now. You're either too lazy to come up with a conservative number that you're sure to use (in which case, that you for your tax dollars) or not able to fully understand how the system works... WHICH IS THE INTENT OF THE ARTICLE! Our health care system isn't even close to optimum but, talk to people in countries with socialized medicine and ask how long thier wait is to be seen or what diagnostic tools are unavailable to them.

  • ET - Wednesday, October 10, 2007, 2:35PM ET  Report Abuse

    • Overall: 3/5

    She says give the idea serious thought. That's all. It won't make sense for everyone. If the fact that a little bit of paperwork is involved, or a person can't come up with a conservative effort is too much to handle then don't do it. For the folks who complain about what an insurance policy covers. That is determined by who you work for. If you want your company to pay for every thing then tell them and they can raise everybody's premiums to cover it. It all comes out in the end. Or go get your own policy to cover only what you think you will need. Maybe if folks would stop going to the ER with a head cold, or insisting that a doctor writre a prescription when OTC ibuprofen or an OTC antacid would work just fine then medical cost might come down a bit. But don't insist on a $5,000 MRI on a $20M machine for a simple 2 day old backache from hauling a giant gut around and then turn around and complain about medical costs. And...do we really need any kind of insurance or FSA that covers a waterpick?

  • Yahoo! Finance User - Wednesday, October 10, 2007, 12:04PM ET  Report Abuse

    • Overall: 4/5

    I see a lot of comments from people regarding these plans being useless. I believe that very few people do not have out of pocket health care expenses these days, so it makes sense to have more money (pre-tax dollars) to cover these costs. I don't have the debit card option, which sounds wonderful, but I can sign up for direct deposit, so that the money gets put in my checking account. I tend to wait until I have a significant number of receipts to turn in before doing the form. It would be a pain to do it for every $10 or $15 charge, so my suggestion is do it 1-2 times a year, fax it in, if possible, and get a nice little chunk of change back in about 2 weeks, without it being a big time burden. Keep in mind that there is a huge list of eligible expenses- they do not all have to be co-pays or orthodontia. I've even seen horseback riding as physical therapy as a covered expense, if medically indicated. For those who are concerned about having money left over at the end of the year, you can use the money for mundane things like over the counter medications, glasses (even prescription sunglasses), contacts, contact lens cleaning solution, etc. When I was pregnant, I had severe back pain, and with a doctor's note, was able to buy our Tempurpedic mattress with money from the flex spend account. I could have also used the money to rent a medical-grade breast pump for low milk supply (but we had spent all the funds by then anyway, so I didn't try- but I was told it would have been a qualifying expense). I'd be shocked if most people truly couldn't find something to spend the last few dollars on in December, even if it's contact lens cleaning solution you later realize you have to exchange for store credit... Another perk is that usually the full annual election is available for use right away. For example, if you elect to contribute $3,000 a year ($250 a month) but have $2,000 of dental work in February, even though you've only put in $500 by February, the plans usually reimburse you up to your maximum election, even though it hasn't all been deducted from your paychecks. You would get your $2,000 reimbursed in full in February and not have to worry about delaying a major expense. BTW, this is not true for Dependent Care Accounts. For those of you who are wondering what happens if you quit your job before they finish deducting the full amount from future paychecks, I don't know the answer- I suppose if your company felt so inclined they could ask you to pay back the advance deduction, but I've never heard of that actually happening.

  • Yahoo! Finance User - Wednesday, October 10, 2007, 9:21AM ET  Report Abuse

    • Overall: 3/5

    The ignorance evidenced by some of these posts is stunning. I seriously doubt an FSA is an employer’s ruse to “boost profits,” and the “use-it-or-lose-it (UIOLI) rule is the IRS’ not your employer’s. The FSA is basically “free money” via federal and state income tax savings, which many people pass up due to a lack of discipline or just plain stupidity. Our company considered extending the claim period the extra 2.5 months, but decided against it - if an employee doesn’t care enough about recouping his/her money by the end of the year, an extension won’t help. (Note Daniel’s comment below, “You can only claim expenses that occurred in the same calendar year, but you have until March 15th to file for the reimbursement.” is correct, IF your company adopted the extension. See my first sentence re: his comment “FSAs are a insult to hard working Americans.”) Yes, the UIOLI rule scares people away from FSAs, but remember that many over-the-counter medications now qualify. Put money away each year, and if you have a balance at the end of the year blow it on Tylenol, cough medicine, contact lens stuff, etc. (Check with your HR department to see what qualifies.) And remember, since FSA money is tax-free, you don’t have top spend it all to break even. If your tax liability is 30%, you won’t lose money unless you leave more than 30% in your account at the end of the year.

  • Donald Irving - Wednesday, October 10, 2007, 4:53AM ET  Report Abuse

    • Overall: 2/5

    I think the FSA would be good were it not for the "use or lose" clause. No one has a magic crystal ball to know how much they will need for medical expenses. My costs vary from year to year so FSA would serve no purpose for me except to boost profits for my employer. The problem, like always, is with the healthcare insurance industry. They are running their companies like thoughtless, unfeeling robots programmed to maximize their profits at the expense of people's well-being and, ultimately, their lives. I can see HSA as a more workable option. To those who are clamoring for socialized medicine, I currently live in Germany where socialized medicine is the status quo. Believe me, you DO NOT want this to come to past in America. It will be your worst nightmare. The wait to get treatment avg. 2 wks. to a month if you need to see a specialist. Since every person gets health care in Germany (even if they are not a citizen or have no interest in working), your healthcare dollars gets siphoned their way which means you will end up paying more out of pocket than you would under any system that has ever been in place in America. Guess what happens if you cannot afford to pay extra to get needed care? You get sent home. It is so bad in Germany, some people (who are lucky to afford it) are turning to privatized insurance because they cover 100% of their medical expenses. However, you must make at least 46,700 Euro (about $66,000) a year to qualify. You pay more but at least you do not have the worry of wondering if an insurance company you have given thousands of dollars to is going to pay the claim you have paid for a hundred times over with your premiums and the resulting interest from those premiums. The U.S. government needs to hold the feet of the American insurance companies "to the fire" and ensure they give the American public the care they have already paid for and therefore deserve.

  • Yahoo! Finance User - Tuesday, October 9, 2007, 9:54PM ET  Report Abuse

    • Overall: 1/5

    This is just another attempt to delay the inevitable. Healthcare is going down the tubes because americans feel that they DESERVE the best healthcare options in the world. Truth be told, this is still a priviledge for the wealthy and is becoming more true with every political debate. There is a solution to our failing healthcare industry; give your employer more of your money that you may not use at the end of the year and make sure to give it to your employer in even intervals over the year so they can gain more money with the money you have set aside in their coffers. Why don't we just hand it over to the insurance companies so they can care for us? Hold it we already do that and guess what, they are out buying yachts and planes with the profit that they are making off of NOT giving the care that we have paid for. I am sorry if I seem bitter but insurance companies are the problem and no one is talking about reforming the insurance industry. They only talk about improving healthcare in America. Healthcare is fine in America. Granted, it is expensive but you get what you pay for. Insurance companies increase your copay every year, pay less to the provider every year, and increase their premiums by enormous percentages every year. I guess they have to start losing money like the airlines before the government will consider stepping in to control costs for the health and well being of the consumer. Well, I can't imagine that is going to happen in my lifetime so I better sign up for my company sponsored FSA. Thanks for listening.

  • Daniel C - Tuesday, October 9, 2007, 3:04PM ET  Report Abuse

    • Overall: 1/5

    Suzie suggests we have 14.5 months to use our FSA funds...this is misleading. You can only claim expenses that occurred in the same calendar year, but you have until March 15th to file for the reimbursement. Additionally, if I had the omniscient ability to predict how much I needed to spend on healthcare in a calendar year, I would quit my day job, work on Wallstreet, and quite obviously not need an FSA. FSAs are a insult to hard working Americans.

  • Yvonne H - Tuesday, October 9, 2007, 2:51PM ET  Report Abuse

    • Overall: 5/5

    Those of you who rated FSAs poorly need a little updating. If you use your FSA debit card at some of the major stores such as Wal-Mart, Walgreens, Target, or Kroger, just to name a few, your flex spending account purchases are substantiated on the spot...no paperwork involved. It's a win-win situation. Excellent article, Suze!

  • JBC - Tuesday, October 9, 2007, 10:58AM ET  Report Abuse

    • Overall: 4/5

    As she says, it's a no-brainer. We add up our prior year out of pocket expenses for medical (deductibles, orthodontia, prescriptions, over the counter [Claritin], etc.), take 80%, and then have that deducted from the paycheck. Not only is it available through a debit card, ALL of our yearly total is immediately available at the start of the year. We have used the entire FSA by October, and start our planning for the next year. If Uncle Sam is willing to help us with our medical (however limited), we'll take whatever we can get. FSAs, DSAs, they're all good.

  • Yahoo! Finance User - Tuesday, October 9, 2007, 9:02AM ET  Report Abuse

    • Overall: 4/5

    The comments from people who didn't like FSAs are mostly those who have had bad experiences from poorly administered plans. Good plans will allow you to sign up for claims to be automatically forwarded to your FSA from your health insurance company. We usually only have to file claims for dental, mental health, vision, etc. Employers choose benefit administration companies to manage FSAs. If you've had a lot of problems with yours, complain to your HR department. That's how things get changed. If you're using Quicken or a similar program, it's easy to see how much you've spent on prescription copays and doctor visit copays. Even setting aside enough for just your copays is worthwhile. My prescription copays are much higher than doctor visit copays for name brand drugs. If you're worried about losing your money, be conservative in your estimate. How is that rocket science or a terrible thing about FSAs? No one expects you to be able to predict that you're going to spend an extra thousand dollars this year on surgery, kids' broken bones, or whatever. And could somebody please edit these comments so inappropriate remarks concerning Suze's personal life don't appear at the top of every list? I'm tired of the personal attacks. Why are those people even reading Suze's column if all they're going to do is criticize her? They clearly don't care that Suze's appeal is her financial knowledge and the way she is able to present it to millions of people in a more accessible way. I've met Suze in person, talked with her, and heard her speak for an entire day. She's got brains, common sense, and experience. Works for me.

  • RR - Monday, October 8, 2007, 9:33PM ET  Report Abuse

    • Overall: 1/5

    Dear Hilary's friend, Please define your socialistic terms at the beginning of your article. Isn't it wonderful when a lesbian woman with no spouse (legally) or chidren and no idea of not being rich give advice to single people and families on how to manage health care. It's like having a blind person describe the sunset to you.

  • Rick B - Monday, October 8, 2007, 7:17PM ET  Report Abuse

    • Overall: 1/5

    you talk about the FSA, what about the HSA. Have you heard of it, Suzie?

  • g - Monday, October 8, 2007, 6:49PM ET  Report Abuse

    • Overall: 2/5

    Seldom do I disagree with Susie, but this one isn't worth the trouble.

  • Yahoo! Finance User - Monday, October 8, 2007, 5:52PM ET  Report Abuse

    • Overall: 2/5

    FSA's may be good from a tax vantage, however our company does not allow carry-overs to the next year, so any money in an FSA is 'use it or loose it' :( (Doesn't seem fair to me to loose whatever I place in there at the end of the year).

  • Yahoo! Finance User - Monday, October 8, 2007, 5:33PM ET  Report Abuse

    • Overall: 4/5

    Don't confuse FSA with HSA, as many commenters have done. Flexible Spending Accounts can save you bundles if you use them. Let's assume I'm planning on having LASIK done next year (roughly $3,500 for both eyes), but I'll have it done in January and pay the entire bill with FSA dollars. Essentially I'll be borrowing non-taxable dollars from myself from an account that I haven't even funded, and I'll pay back that debt with absolutely no interest throughout the year. So in "after tax" dollars (even assuming that I'll have no taxable income on my 1040 at the end of 2008), my $3,500 procedure will only cost me $3,232 which will be deducted at $292 every month, and I'll save $268 in FICA withholdings throughout the year. How is this a bad idea? All Suze is doing in this article is reminding people that it's a good idea to consider an FSA as a very good option to offset rising healthcare costs. Nowhere in this article is it suggested that this will somehow fix the health care "crisis" that exists. It only describes one effective way that individuals and families can cope with it.

  • Yahoo! Finance User - Monday, October 8, 2007, 4:33PM ET  Report Abuse

    • Overall: 2/5

    HSA is not the answer. We all pay medicare out of every paycheck we earn during our entire life. Therefore we should be able to seek medical care under the medicare rates. That equals affordable healthcare that we have paid for in every pay check. Therefore, we don't need the rip off monthly payments of insurance premiums for insuance plans that don't cover anything anyway. Let me be uninsured and pay only for th the medical care I need under the medicare rates that I have been contributing to since I was 16. We can all afford those rates. Pay as we seek care.

  • Ashish P - Monday, October 8, 2007, 4:21PM ET  Report Abuse

    • Overall: 5/5

    I agree with Suze on this article, FSA is not marketed enough by employers. We are a small manufacturing company we have always had a rich benefit program. We have just seen a huge increase over years and there has been a big increase in cost. We have done a lot of creative things and we have sold the concept of higher Co-pay and FSA and based on employee survey we found that folks are ready to pay a higher copay to keep the cost down. We have needed to explain about FSA and the biggest selling point was it is pretax. Last year we worked with a new TPA and they made the process better by eliminating paper work. They introduced the debit cards which are convinent & hasel free. You still have to keep records since they can audit you and ask for receipts for purchases or co-pay's. I definately recommend readers to make the call this is a no brainer. Enroll in a FSA program.

  • SD - Monday, October 8, 2007, 4:12PM ET  Report Abuse

    • Overall: 2/5

    Over the last 20 years I've averaged about $20/year in FSA-type costs. That includes a surgery I had last year that only cost a $10 co-pay. (Employer-sponsored plan; there is no alternative with a significantly higher co-pay to save on premiums.) Now I'm sure over time that 30% (or whatever) savings on $20/year will add up, but is it really worth it for me? Honestly? For me I'd rather do without the stress of an FSA -- will I spend it all? will my claims be rejected? -- and sleep well at night. (OTOH, an HSA is a different animal all together. There's a good chance that my medical costs will skyrocket as I age.)

  • JasonS - Monday, October 8, 2007, 3:52PM ET  Report Abuse

    • Overall: 1/5

    I hate my FSA. The paperwork is ginormous, and then the wait to get reimbursed is endless! All for a couple pennies, I wish I had valued my time higher and skipped this "benefit". I guess its great is you want Lasik, braces, or liposuction. otherwise, forget it. I do use a dependent care savings account. that works better, except i really have to dole out a month's worth of expense extra before I get reimbursed. I tell you, nationalized coverage would be so much easier. I betcha ole millionaire Orman does not think that is too good an idea, LOL!

  • Yahoo! Finance User - Monday, October 8, 2007, 3:48PM ET  Report Abuse

    • Overall: 5/5

    I normally cringe at Suze's articles, but I must give her kudos on this one. She actually brings a good reminder to those who aren't taking advantage of this opportunity.

  • Rajiv M. - Monday, October 8, 2007, 3:46PM ET  Report Abuse

    • Overall: 3/5

    The FSA suggestion are perhaps reasonable for some people but worthless in most if you can't predict your medical expenses. Similarly someone mentioned HSA which roll from year to year, but it has its own problems. I have tried them both. For HSA, you put in money on a pre-tax basis to cover your high deductible, that's good. But here is the HSA catch: when you use your check or credit card for medical expenses (even over-the-counter is covered) , they report it as a distribution at the end-of-the-year. So the distribution must be added as income. Now in principle, you can claim the medical expenses as an itemized deduction on Sch.A, but only the amount over 7.5% of your gross income. So even though the benefits planners extoll the pre-tax basis of HSA, it really isn't so in many situations. For the FSA the pre-tax is really pretax, so if can plan in advance, FSA is the way to go. Bottom line, we have had enough of this FSA, HSA nonsense, where everyone is pushed to continually evaluate pros/cons of this and that, and many other financial decisions. Tax laws are complex enough. People need meaningful health care reform now.

  • noyb - Monday, October 8, 2007, 3:13PM ET  Report Abuse

    • Overall: 1/5

    I am sure Ms. Orman means well. However, health savings account will only make a very small dent in medical costs. This is basically like trying to kill a tiger with a flyswatter. We have a very serious healthcare problem in this country and it is going to take serious government intervention to make headway.

  • Yahoo! Finance User - Monday, October 8, 2007, 3:03PM ET  Report Abuse

    • Overall: 5/5

    If you are offered FSA and don't use it you are screwing no one but yourself. The use it or lose it goes both ways, so lets say you know you're getting laid off or quitting in Feb. You put 5,000.00 in the fsa use all 5,000.00 in Jan. You do NOT owe the difference when you get fired in Feb.. If you're worried about not using it and losing it consider that since its pre-tax, and say you contributed 1,000 but only used 700.00 of it you'd still be even(if you're in the 30 % bracket), Use it for co-pays, those dental procedures that only cover 50 % like crowns, bridges ,or stuff not covered at all. Like laser eye surgery, eyeglasses,insulin, and now even some OTC stuff like humidifiers, air purifiers, bandages, etc. are covered. Many health plans link the FSA to your insurance so there are NO FORMS to fill. Those that don't use FSA are either 1. Lazy, or 2. Don't understand it or 3. Don't think they'll be using a Dr. or Dentist anytime soon.

  • Yahoo! Finance User - Monday, October 8, 2007, 2:42PM ET  Report Abuse

    • Overall: 5/5

    Contrary to the comments made by some naysayers, inluding the benefits admistrator, some good basic planning and cost projections will get you there. For routine copoays etc, it may not save you much year to year. IN my case, my dentist had told me that my old teeth needed crowns. My insurance covered 50% which left me with about $1200 out of pocket for 2 crowns. I budgeted this money and planned my crowns opver 3 years. Fortunately, none of thos teeth broke before getting the crfowns. I have also paid for $4,000 laser correction surgery and my wife has helped pay for her sons braces. In any of these cases, it has helped us save significant money over the last 6 years when you correctly plan your major medical expenses. It also cover alot of over the counter meds. If you are a little short, maybe you buy a little extra aspirin, cold medicines and the like to spend the money. Your company should be able to provide you with a list of what is and is not covered with over the counter mediciations.

  • Yahoo! Finance User - Monday, October 8, 2007, 2:31PM ET  Report Abuse

    • Overall: 1/5

    FSA are not practical (by and large) for four distinct reasons (I have worked as a Benefits Administrator, so trust me). This article is just making a big deal out of a small thing. 1) You lose money if you dont use it within the specified date (Mar 15 of following year) 2) One can never predict what medical expenses you will incur. Even if you did correctly, the risk of losing is much more than that of gaining. 3) Paperwork for FSA is a nightmare. Nobody tells you this, this is sad truth. They (Insurance administrators) talk big but when it comes to paying money, they beat around the bush 4) When you quit/get fired, you need to enrolled in COBRA to use your money. The problem with such authors is they are not in a realistic & transparent mode. Hope this helps in your analysis.

  • Scott - Monday, October 8, 2007, 2:05PM ET  Report Abuse

    • Overall: 1/5

    Absolutely garbage...these plans are worthless. The way we need to go is HEALTH SAVINGS ACCOUNTS where it rolls over from year to year. I had one and it was great. I had checks and a debit card so I could use it when I wanted to...you just had to keep the receipts to prove to the IRS that it was medically related, but the insurance company wasn't deciding it for you. I think Suze is in the pockets of the insurance companies that house these worthless options. Even if you did spend $1,000 a year on out of pocket expenses, it all the paper work and nightmares worth a couple of hundred extra dollars when you could save the same amount in some other form? I don't think so...Suze, get in touch with the real world!

  • Yahoo! Finance User - Monday, October 8, 2007, 1:53PM ET  Report Abuse

    • Overall: 3/5

    Just a point of information, if you do not use the money in your FSA, the insurance company does not recieve it, your employer or a company they source to manage the FSA keeps it. I am not the biggest fan of insurance companies, but they take a lot of the bad press that should be attributed to the employers. An employer that offers an FSA in their plan is doing you a favor. It is not forced on you and used properly it will save you money. When charges are denied by an insurance company, they are acting on specific instructions established by your employer in the benefits agreement, so don't blame them.

  • Yahoo! Finance User - Monday, October 8, 2007, 1:38PM ET  Report Abuse

    • Overall: 5/5

    Some 1 star raters comments are real dumb. First of, you only set aside money each year when you know you are going to be using it, for things like glasses, contact lenses, co pays, over the counter drugs. And you calculate how much you'd need a year. I usually need 1000 for a family so I save about $300 because of pre tax. I underestimate a little so I don't lose the money. And FSA, allows you to claim up to March the following year, so you have 15 months to use it. For my company it's done online and so easy.. I get reimbursement 3 to 5 days after I filed it. For the guys that say why not put more money in 401K, what if we already maxed it? Really, please think before you rate the article. Even if I know everything there is to know about FSA, I would not judge the article because I already know. There are a lot of people who don't know it.

  • Yahoo! Finance User - Monday, October 8, 2007, 1:07PM ET  Report Abuse

    • Overall: 3/5

    FSA can be a great tool for managing health care costs. Unfortunately, it has a difficult dark side for people who find themselves unemployed (due to layoff or end of contract or whatever). I found upon layoff that my FSA account was frozen and my debit card would not work. The only way to access the funds that i had saved into the account was to pay a COBRA premium each month (the same amount that i had been depositing while employed) plus a 2% "administration fee". This seems like extortion to access my own savings account. Two months after being laid off, i still cannot access my FSA -- because the COBRA company and the FSA company have not yet completed their "administration" (what am i paying an "administration fee" for???). The COBRA company withdrew funds from my checking account within hours of receiving my check, but they are taking weeks to complete their "administration". I suppose i will be reimbursed eventually for my health expenses -- probably another two to four months after these sluggish companies finally re-activate my account. During unemployment is when an individual -- and their family -- needs the FSA funds the most. The COBRA rules should be changed so that an unemployed individual can continue to have access to their FSA without interruption -- and without continuing to deposit money into it. As for an "administration fee" -- the FSA company has the opportunity to earn interest from my deposits -- which should more than cover their costs of administration. After this very frustrating experience trying to gain access to my own savings, i doubt that i will participate in an FSA again. I would like the opportunity to participate in an HSA, unfortunately my employer did not offer that option. Maybe the next one will......

  • Yahoo! Finance User - Monday, October 8, 2007, 12:59PM ET  Report Abuse

    • Overall: 3/5

    The only people that knock these plans are people that don't understand them. 1. You have more control over your healthcare. Example: You can now afford to pay that extra $100 for the specialist that is not on your approved doctor list. 2. Those that say it is not worth the hassle. you save 30% by using pretax dollars, but you must send in receipts to show proper use/justification. Example: It takes 3 minutes to mail in receipts for justification. You saved $25 by doing this. $25*20 (blocks of 3 minute incriments in an hour)=$500. This means that unless you are making $500 an hour it is worth your hassle to fill out the claim forms. 3. your taxable income is lowered, plus you can pay for so many items. Just do it!

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