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How to Save More Than the Contribution Limit with Flexible Spending Accounts

By on February 24, 2014 in Money

How to Save More Than the Contribution Limit with Flexible Spending AccountsAs of 2013 contributions into flexible spending accounts are no longer uncapped. (Most employers set a $5,000 cap, but it wasn’t a government requirement.)

Since January 1, 2013 there is now a regulated cap of $2,500 per year. That means you can set aside $2,500 of pre-tax income each year into a flexible spending account. Those funds must be used on eligible healthcare expenses during that year or you forfeit any remaining funds to the plan or the employer.

For individuals or healthy couples, $2,500 is a lot of money to spread out over office co-pays and the list of eligible expenses that government will allow you to spend the money on.

However, for families with kids – especially families with many kids – $2,500 doesn’t go very far. It seems like you are always taking one of the kids to the doctor every time you go to a new day care, or the kids back to school after summer break, or they switch classes.

Thankfully, you aren’t stuck with just using $2,500 of that money in a FSA. There are a couple of work around options that are not highly publicized.

How to Save More Than $2,500 in a Flexible Spending Account

Here are three different methods of setting aside more money into FSAs:

Work for Two Unrelated Employers

You can save $2,500 per year into a flexible spending account at each employer you work for that has a health plan that utilizes a FSA.

That means if you have been holding down two jobs and each job offers a FSA you can contribute $2,500 at each job into each FSA. That gives you $5,000 to spend on healthcare in a given year. In the 25% tax bracket that saves you $1,250 per year in taxes.

The only catch is the employers cannot be related meaning you can’t work for the primary company and then a subsidiary. They cannot be legally connecting in that manner.

Be Married with Two Separate Health Plans with FSAs

Alternatively, you could be married and have each spouse be covered by a FSA at their place of employment. It is just like having the first situation. There are two jobs, and the option for each person to contribute at $2,500. The only difference is that even spouses that are covered by the same health plan — that is, they work for the same employer or own their own business together — can still each set aside the maximum of $2,500.

A Combination of the Above

Lastly, you could do a crazy combination of the two above scenarios where each spouse is employed by a primary employer with a $2,500 annual FSA limit for each employee bringing their total to $5,000.

Then one of the spouses is also covered by another employer at their side job. Technically that spouse could then contribute $2,500 toward that plan’s FSA to be used for eligible health spending bringing the couple’s total to $7,500 for the year.

The only problem with setting that much money aside in a FSA is that if you don’t use it by the end of the year, you lose it. I’d rather pay tax on income than to set it aside pre-tax and then forfeit it at the end of the year.


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