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Can You Start a FSA After a Major Medical Expense?

By on March 11, 2014 in Health Insurance, Insurance

Can You Start a FSA After a Major Medical Expense?Flexible Spending Accounts or FSAs are a great tool to save money on medical procedures, prescription medicine, and doctor visits.

With a flexible spending account you are allowed to set aside money on a pre-tax basis into the FSA account.

Using a debit card or through a reimbursement, you then spend those dollars on medical costs. (Only certain medical costs are covered due to government regulations. See online documentation from your human resources department or health insurance company as to which medical expenses are allowable under a Flexible Spending Account.)

As long as you spend the money on approved medical procedures you never pay tax on the income you set aside into the FSA. This is a huge tax break.

That means you can save anywhere from 10% to 39% on your medical costs depending on your tax bracket. This is a huge potential savings just for proactively setting money aside for medical spending.

If your employer offers a Flexible Spending Account to you there are certain times of the year that you can decide to use the account. A common question is whether you can start a FSA after you have a serious medical cost. That is, if you just had to spend $5,000 on a medical procedure can you turn around and start an FSA with your employer to offset some of the cost after the procedure has been completed?

Can You Start a Flexible Spending Account After a Major Medical Expenditure?

Unfortunately, FSAs can only be started at certain points during the year.

That means if you unexpectedly had to spend a lot of money on a medical procedure yesterday, you cannot start an FSA today to help offset some of the costs.

However, you can be strategic in how you open and fund a FSA.

When Can I Start a Flexible Spending Account?

There are three times you can start a Flexible Spending Account.

When You are First Hired

During your new hire paperwork you will sign a ton of paperwork. Part of that paperwork includes your benefits packet including your health insurance. If your employer offers a FSA there will be documentation included in the paperwork packet offering you the option to fund the account.

Open Enrollment

Each year your employer’s health insurance company allows you to make voluntary changes to your benefits during a period called open enrollment. During open enrollment you can add, drop, and change your benefits options. You can opt to open and begin funding a Flexible Spending Account during this period.

Life Changing Event

Lastly any time you have a significant life changing event you are allowed to make changes to your benefits. Examples of life changing events include marriage, divorce, birth of a child, child gains or loses eligibility for coverage, and death of someone on the plan.

If you experience one of these life changing events you can make changes to your benefits for a period of time after the life changing event.

Even though you can’t opt to start and fund a Flexible Spending Account after a major medical expense, you can be smart in when you decide to start a FSA with your employer’s health insurance.

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