Daily Dupaco

Wednesday, December 08, 2010

Know the new rules for flex spending accounts

While contributing to a health-care FSA is a great way to use tax-free payroll deductions to cover medical expenses, health-care reform will change the ways you can use funds in 2011 (Kiplinger Oct. 15).

Here are some examples:
  • Over-the-counter drugs no longer qualify without a prescription.
  • New rules may cover adult children's expenses. If your employer has expanded the definition of dependent to include any child younger than 27 at the end of the year, you may be able to use money in your FSA for adult children's out-of-pocket expenses. Previously, this worked only if the child was a dependent for tax purposes.
  • FSA limits will be lower in the future. FSA limits aren't changing next year, but the maximum limit will shrink to $2,500 in 2013. So if you're considering a medical procedure that isn't covered by insurance, such as laser eye surgery, you might want to schedule it in 2011 or 2012.
Dec. 31 marks the eve of a new year and is also the deadline for many with flexible spending accounts (FSA) to spend funds allocated in 2010. Be sure to check with your plan administrator on this important deadline, as well as the deadline for submitting reimbursement claim requests for eligible expenses.

Click here for more from the Home & Family Finance(R) Resource Center.
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