For small business owners, providing comprehensive employee benefits is vital to attracting and retaining employees. Whether it's health insurance, paid time off (PTO), or retirement plans, these perks can make a big difference in an employee's decision to join or stay with a company. Among these benefits, Flexible Spending Accounts (FSAs) stand out as a valuable tool for employees to manage their health care expenses. Complementing health insurance coverage, FSAs give employees greater flexibility and control over their medical spending.
FSAs offer more versatility than just paying for doctor’s visits and medications. While many people use FSAs to cover general health care costs, there are creative ways to use these accounts that are often overlooked. From chiropractic treatments to sunscreen for vacation, various health care services and products are eligible for reimbursement through FSAs. By exploring the full range of eligible expenses, you can maximize the benefits of FSAs for both you and your employees.
How FSAs Work
An FSA is a type of savings account that allows employees to allocate a portion of their paychecks for designated expenses. By depositing pre-tax funds, FSAs help you and your employees save money. Additionally, as an employer, you have the option to contribute to your employees’ FSA, but it is not mandatory.
To utilize FSA funds, individuals must submit a claim along with proof of an eligible expense, such as a receipt, in order to be reimbursed.
Different types of FSAs determine how FSA funds can be spent:
- Health Care FSA: The accounts can be used to pay medical costs not covered by insurance, including deductibles, copayments, prescription medications, over-the-counter health care items, and more.
- Dependent Care FSA (DCFSA): A DCFSA is used to pay for costs associated with care for children or a dependent adult, enabling parents and caregivers to work with less financial strain.
- Limited Purpose FSA (LPFSA): Funds in an LPFSA are designated for dental and vision costs. This type of account is a favorable choice for individuals with a High Deductible Health Plan (HDHP) and a Health Savings Account (HSA).
Common Uses Of An FSA
FSAs are valuable because they can address a variety of medical expenses that may not be fully covered by health insurance. They can assist with the following costs:
- Medical: You can use an FSA to pay for doctor’s visits, procedures, surgeries, and treatments, as well as cover co-pays and deductibles.
- Vision: FSAs can cover eye exams, prescription glasses and sunglasses, contact lenses, and even corrective procedures like LASIK.
- Dental: An FSA can be used for routine teeth cleanings, fillings, braces, and other necessary dental treatments.
- Prescription medications: FSAs can help with the costs of both prescribed brand-name and generic drugs, including insulin, antidepressants, birth control, and more.
- Over-the-counter health care items: Bandages, antibiotic ointments, allergy medications, and pain relievers are items frequently purchased with an FSA.
Creative Ways To Use FSAs
The funds held in an FSA do not roll over and must be used by the end of the calendar year. From stocking up on first aid supplies to trying out alternative therapies, there are many ways your employees can make the most out of their FSA funds.
By offering creative suggestions for how your employees can use their FSA funds, you not only help them maximize their benefits but also demonstrate your commitment to their well-being. The potential uses of FSAs extend far beyond conventional health care needs and can be used for the following:
Mental health and self-care
FSAs can support numerous mental health and self-care needs. Employees can use the money in their FSAs to cover various costs related to mental health services, such as therapy appointments, counseling sessions, or psychiatric care. In addition, FSAs can be used to purchase self-care items such as skincare products, acne treatments, or even relaxation aids including essential oils.
Health and fitness
Employees can use their FSAs to aid in their health and fitness journeys. Gym memberships, health clubs, and weight loss programs can be reimbursed through an FSA with a letter of medical necessity, allowing individuals to prioritize their fitness goals. Health trackers and nutritional supplements such as vitamins and minerals can be purchased with FSA funds to further assist in maintaining physical health. Items that support recovery and pain relief, such as orthopedic shoe inserts and knee braces, can also be covered by an FSA.
Professional services
Whether an employee is seeking treatments for pain relief or pursuing a holistic approach to health, there are numerous professional services that can be paid for with an FSA. Physical therapy, chiropractic care, and acupuncture are all FSA-eligible services that can help manage chronic pain and improve overall wellness. An FSA offers employees a range of options to address their individual health needs.
Travel essentials
An FSA can offer unexpected benefits when it comes to purchasing travel-related items. For example, travel essentials such as sunscreen, insect repellent, and travel-sized first aid kits are eligible purchases. Using an FSA to buy necessary supplies for travel not only ensures a safe and healthy trip but also helps with spending FSA funds before they expire.
Advantages For Small Business Owners
Small business owners can gain numerous benefits by offering FSAs to their employees. Since FSAs allow employees to use pre-tax dollars to cover specific costs, payroll taxes are reduced for both employers and employees. Contributions made to an FSA are also tax-exempt for employees and tax-deductible for employers, offering mutual benefits.
Providing your employees with the option to enroll in an FSA can also enhance employee satisfaction and retention, as it is a valuable perk on top of health insurance. By offering this benefit, you not only save money on taxes, but you also display your commitment to your employees’ health and overall well-being.
Employee Benefits With A PEO
As a small business owner, it’s crucial to offer a benefits package that’s appealing to current and prospective employees. However, administering benefits can be costly and time-consuming. Partner with a PEO like GMS to save money and streamline your benefits management. We can assist in processing group health insurance, retirement plans, wellness programs, and more. Additionally, individuals with an FSA can visit our FSA Store to explore eligible products that can be purchased with their accounts. Contact us today to optimize your employee benefits offerings and ensure your business stays competitive in attracting top talent.