FSA / HSA
A Flexible Spending Account (FSA) is a benefit plan that allows you to set aside tax-free dollars from your pay check into a special account that can be used throughout the year to reimburse yourself for eligible out-of-pocket expenses. Since you are "paid back" out of an account that is never subject to taxes, you pay less tax on your total earnings.
A Health Savings Account (HSA) is a tax-advantaged spending and savings account that can be used to pay qualified medical expenses. (It is sometimes anecdotally referred to as a medical 401k.) It takes two components to create an HSA-based health coverage plan:
- A HSA-eligible health plan
- Health Savings Account (HSA)
The HSA-eligible health plan is the insurance component. It provides medical coverage for you and your family in case of emergency, major illness, or high annual health care costs. It has a deductible that is higher than in a traditional insurance plan, but HSA-eligible plans feature significantly lower premiums.
What does the 
icon mean?
These products are all eligible for use with FSA and HSA accounts. The IRS creates the initial guidelines for FSA and HSA plans.
What is "use it or lose it?"
If you do not use all the money that you contribute to your FSA/HSA for claims incurred by the end of the plan year, IRS rules require that the money be forfeited. Careful planning of your yearly expenses and awareness of your account balances and filing deadlines will assist you in using your FSA/HSA to its maximum potential. You have until your plan year end to get your money out of your FSA/HSA account for expenses incurred during the previous plan year.
How long does a FSA/HSA last?
A FSA/HSA typically lasts for one year, or until a time when the coverage would end (end of employment, for example). Because of this, it is important to plan ahead for how much should be allocated to the flexible spending account based on medical expense needs.
Grace Period
In 2005 the IRS authorized an optional 2 1/2 month grace period that employers can use in their plans. Allowing use of the plan year funds for 2 1/2 months after the end of the plan year would help reduce the forfeiture of employee funds due to the "use it or lose it" requirement.
Example: If your plan year is December 31, then you would have an additional 2 1/2 months or until March 15 to use the remaining funds from the previous plan year. Any money remaining after the 2 1/2 month grace period from the previous plan year would be forfeited.
What kinds of over-the-counter medications and products can I get reimbursed for through a FSA or HSA?
Non-prescription antacids, pain relievers, allergy medicines, cold medicines, sports wraps, arch and insole supports, home diagnostic tests/kits and other medicines or products purchased to alleviate or treat the personal injuries or sickness of you and/or your dependents are eligible items for reimbursement. Vitamins and other dietary supplements that are simply beneficial to you and/or your dependent are not eligible for reimbursement. Keep in mind that when submitting a claim for over-the-counter medicines and products, a detailed receipt naming the product will be required.
