Innovative Insurance GroupInnovative Insurance Group
  • Home
  • About Us
    • Office Locations
    • Advisors & Consultants
    • Client Success Team
    • Community Support
  • Solutions
    • HR & Compliance
    • Individual & Seniors
    • Group Benefits
    • Benefits Consulting
    • Broker Resources
  • Events
  • Video Library
  • Blog
  • Contact Us
  • Home
  • About Us
    • Office Locations
    • Advisors & Consultants
    • Client Success Team
    • Community Support
  • Solutions
    • HR & Compliance
    • Individual & Seniors
    • Group Benefits
    • Benefits Consulting
    • Broker Resources
  • Events
  • Video Library
  • Blog
  • Contact Us

The Truth About FSAs: Facts, Myths, and Tips

The Truth About FSAs: Facts, Myths, and Tips

Posted: July 7, 2025  

Flexible Spending Accounts (FSAs) offer unique advantages for managing health and dependent care expenses, but they operate differently from standard savings or spending accounts. Below are five essential facts about FSAs, along with common myths and clarifications to help you make the most of this benefit.

Key FSA Facts:

  1. Tax Advantages: A major perk of FSAs is the tax savings. Your contributions are pre-tax, lowering your taxable income and potentially saving you hundreds of dollars annually, depending on your tax bracket and contribution amount.
  2. Broad Coverage: Health care FSAs can be used for a wide range of eligible expenses, including vision and dental care, mental health services, medical equipment, and many over-the-counter items such as bandages, contact lens solution, and sunscreen—often without a prescription.
  3. Different FSA Types: The most common FSAs are Health Care FSAs for personal medical costs and Dependent Care FSAs (DCFSAs) for expenses like daycare, preschool, summer day camps, and elder care.
  4. Grace Periods or Carryovers: While generally “use it or lose it,” many employers offer flexibility. You might be able to carry over up to $660 of unused funds into the next year (2025 limit) or have a grace period of up to 2.5 months to spend remaining funds. Employers choose one option, not both.
  5. Immediate Access to Your Health Care FSA Funds: Unlike a typical savings account, your entire annual Health Care FSA election is available to you from the first day of the plan year, even though you contribute through payroll deductions over time. This immediate access doesn’t apply to DCFSAs.

5 Common FSA Myths Debunked

Myth: “All unused FSA funds are lost at year-end.”

Reality: Many FSA plans include a grace period or allow a carryover of unused funds (up to $660 in 2025), so you may not lose your money if you act within the allowed timeframe.

 

Myth: “FSAs and HSAs are the same.”

Reality: Both offer tax benefits for health costs, but they differ significantly. HSAs require a high-deductible health plan, can earn interest, and funds roll over indefinitely. FSAs don’t earn interest, and unused funds typically expire (unless a carryover or grace period applies).

 

Myth: “You must keep receipts for every FSA expense.”

Reality: While some purchases might require documentation, many FSA cards automatically recognize eligible expenses at participating merchants. However, it’s always wise to keep receipts in case your FSA administrator requests proof.

 

Myth: “I can change my contributions anytime.”

Reality: FSA elections can usually only be changed during open enrollment or after a qualifying life event, such as marriage, divorce, or the birth of a child.

 

Myth: “You can enroll in both a health care FSA and HSA.”

Reality: You cannot have both a Health Care FSA and an HSA. However, if you have an HSA, you can still enroll in a Dependent Care FSA or a Limited FSA, which specifically covers dental and vision expenses.

FSAs are valuable tools for managing health and family-related expenses while reducing your taxable income. Understanding how they work and recognizing common misconceptions can help you maximize their benefits. Check with your employer for details on contribution limits, eligible expenses, and any rollover or grace period features offered by your specific plan.

 

 

 

  • Tags Flexible Spending Account

Archives

  • July 2025
  • June 2025
  • May 2025
  • April 2025
  • March 2025
  • February 2025
  • January 2025
  • December 2024
  • November 2024
  • October 2024
  • September 2024
  • August 2024
  • July 2024
  • June 2024
  • May 2024
  • April 2024
  • March 2024
  • February 2024
  • January 2024
  • December 2023
  • November 2023
  • October 2023
  • September 2023
  • August 2023
  • July 2023
  • June 2023
  • May 2023
  • April 2023
  • March 2023
  • February 2023
  • January 2023
  • December 2022
  • November 2022
  • October 2022
  • September 2022
  • August 2022
  • July 2022
  • June 2022
  • May 2022
  • April 2022
  • March 2022
  • February 2022
  • January 2022
  • December 2021
  • November 2021
  • October 2021
  • March 2020
  • February 2018
  • January 2018
  • November 2017
  • October 2017
  • August 2017
  • July 2017
  • June 2017
  • May 2017
  • April 2017
  • March 2017
  • October 2016
  • September 2016
  • August 2016
  • July 2016
  • June 2016
  • May 2016
  • April 2016
  • March 2016

Categories

  • Affordable Care Act
  • Americans with Disabilities Act
  • Benefits
  • Compliance
  • Custom Content
  • Cyber Security
  • DEI
  • Disability Insurance
  • DOL
  • Economy
  • Employee Benefits
  • Employee Experience
  • EOB
  • ERISA
  • Financial Health
  • FSA
  • Generations
  • Goals
  • Health
  • Health Care
  • Health Care Costs
  • Health Insurance
  • Health Plan
  • Health Savings Account
  • HR
  • HR Trends
  • Human Resources
  • IRS
  • Leadership
  • Learning and Development
  • Mental Health
  • Open Enrollment
  • Technology
  • Trending Topics
  • Uncategorized
  • Voluntary Benefits
  • Wellness
  • Work Life Balance
  • Workforce
  • Workplace Culture
  • Workplace Wellness

Meta

  • Log in
  • Entries feed
  • Comments feed
  • WordPress.org

Learn more about insurance, administrative and HR solutions

Schedule a free
consultation
Innovative Insurance Group

Committed to helping evaluate, implement, and maintain the insurance and benefit plans of choice for our customers, their employees and their families in the communities we serve.

Sitemap | Privacy Policy

Recent Posts

  • The Truth About FSAs: Facts, Myths, and Tips
  • Breaking Down Your Benefits: Understanding Key Terms
  • Why People Analytics Are Paramount
  • Form 5500 Filing Requirements: Deadlines, Penalties, and Compliance Options
  • Benefits 101: What Is Cancer Insurance?
Find a Location
  • Home
  • About Us
    • Office Locations
    • Advisors & Consultants
    • Client Success Team
    • Community Support
  • Solutions
    • HR & Compliance
    • Individual & Seniors
    • Group Benefits
    • Benefits Consulting
    • Broker Resources
  • Events
  • Video Library
  • Blog
  • Contact Us

© Copyright 2025 - Innovative Insurance Group
All Rights Reserved

Developed by eTekhnos Technology With Benefits