Time to make your flexible spending account choices
Workplace benefits open season for child care and health FSAs
Fall has arrived. That means in addition to leaves changing colors, some folks will be changing their workplace benefits.
Yep, the open season for employer-provided options is or about to be underway in offices across the country.
One of the most popular benefits is the tax-favored flexible spending account, usually referred to as an FSA. As the latest Weekly Tax Tip details, these worker accounts offer tax-saving ways to cover some child care or health care costs.
The key to both accounts is knowing your, and your family's, needs and then managing the accounts carefully.
Putting away pre-tax dollars: Both a child care FSA and health (formerly medical) FSA allow workers to put in money through payroll deductions that are made before the employees' taxes are calculated. This pretax money then is used to pay for eligible expenses.
Determining the amount to place in child care FSA generally is easier.
The tax code allows parents to contribute up to $5,000 in this account. Employees with these accounts tend to max them out since, as any parent will tell you, child care tends to run way more than five grand.
Note, too, moms and dads, that the $5,000 is a family maximum. So if both parents are allowed a child care FSA, they need to determine which worker gets the most benefits from this workplace perk.
New limit on health FSA: A worker can put up to $2,550 in a health FSA.
Companies used to set the contribution limit and in many cases back then, the limit was almost twice what it is now. But a provision of the Affordable Care Act capped medical health FSAs at $2,500 with an annual inflation adjustment.
Analysts with Wolters Kluwer (previously known as CCH by us tax old-timers) and Bloomberg BNA both predict that the contribution limit in 2016 will stay at $2,550. The Internal Revenue Service is expected to announce FSA and other official inflation adjustments for the coming tax year later this month.
That $2,550 cap for two years running, or at least projected, on health FSA contributions also is this week's By the Numbers figure.
Determine FSA needs carefully: The key to both workplace accounts is doing your homework before you sign up.
Yes, you can make changes if there's a major life change -- marriage, divorce, spouse's job change, new baby -- but most of the time you're stuck with what you choose during open season.
So in determining how much to put into a health FSA, you need to consider your and your family members' health care needs, what your health insurance does and doesn't cover, and any special medical situations, such as junior's orthodontia, that you might encounter during the coming benefits year.
An accurate analysis guesstimate can help shave a few dollars off your taxes and give you a way to pay for medical costs that otherwise would come out of your pockets.
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