Government employee discounts

How Enrolling in an FSA Can Help Beat Rising Costs

Everyone is facing higher costs for almost everything. Medical and dependent care expenses are no exception. Health care costs rose faster in 2021 than they have in at least ten years. Childcare and elder care also went up.

One way to save on those outlays is a flexible spending account (FSA). For federal employees, the FSA is FSAFEDS. With FSAFEDS, funds are automatically deducted from your paycheck before payroll taxes and put into an account you can use throughout the year to cover qualified medical or dependent care expenses. Because the money is set aside before taxes are taken out, your taxable income is lower. And since federal income and Social Security taxes are based on that income, you’ll pay less in taxes.

The savings can really add up. For example, say you make $50,000 a year and have $2,000 in medical costs that your insurance doesn’t cover. You can pay for them with your FSA and cut your tax bill by $600. Based on current tax rates, the FSA can save you up to 30%* of the cost of eligible expenses. You can calculate your own savings here.

FSAFEDS offers accounts for health care (HCFSA), child and dependent care (DCFSA), and one for employees in HSA-qualified high deductible health plans (LEX HCFSA). All three allow you to use pre-tax dollars to pay for care.

Let’s get to the details of the three types of accounts.

Health Care FSA (HCFSA) — Pays for eligible medical, dental, and vision care expenses not covered by your insurance plan or elsewhere. For 2023, you can put a maximum of $3,050 in your account, and use it for expenses including:

  • Doctor visits
  • Prescription drugs
  • Surgery
  • Massage therapy
  • Glasses and contacts
  • Menstrual care products
  • Masks and hand sanitizing wipes (with 60%+ alcohol base)
  • Other qualified expenses

And, if there’s money left in your account at the end of the plan year and you re-enroll the following year, you can carry over up to $610 for the next year’s expenses — no more “use it or lose it.”

Limited Expense Health Care FSA (LEX HCFSA) — If you’re enrolled in a high-deductible health plan and have a health savings account (HSA), you generally are not allowed to have a regular health care FSA. That’s where the LEX HCFSA comes in. It allows you to take advantage of savings for eligible out-of-pocket dental and vision expenses. As with the HCFSA, you can set aside up to $3,050 in 2023, and if any funds are leftover at the end of the plan year, you can carry over up to $610 for the next year’s expenses.

Dependent Care FSA (DCFSA) — Pays for care for those you care for. Eligible dependents include your children under age 13, and your spouse or other relative who is physically or mentally incapable of caring for themselves and lives in your home.  

For children under 13, you can use money from your DCFSA toward costs such as:

  • Before and after school care
  • Babysitting and nanny expenses
  • Daycare, nursery school, and preschool
  • Summer day camp

For a spouse or a relative who qualifies as a dependent, your DCFSA can cover care including:

  • Adult and senior day care
  • Elder care in your home
  • Custodial care while you are at work

In 2023, you can set aside up to $2,500 for an individual or $5,000 per household in a DCFSA. The IRS does not allow any funds left at the end of the year to be carried over, but the DCFSA grace period allows you to submit claims for expenses incurred from January 1, 2023 to March 15, 2024.

The FSAFEDS program provides tax savings for participating government agencies and their employees. FSAFEDS allows agencies to give their employees tools to address today’s rising costs now and those they face in the future.

Employees can enroll in FSAFEDS during the annual Federal Benefits Open Season from November 14 through December 12, 2022, midnight EST. Participants must re-enroll each year to continue utilizing the FSAFEDS program. Visit to learn more and enroll.

*Assumes a combined tax rate of 30% including FICA, state, and federal income taxes. Actual amounts may vary.

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