More on FSAs
Employees must elect to fund their FSA in October, and then use their FSA within the next calendar year.
They enrol in October of the previous year, selecting the amount of money they wish to allocate, up to a maximum of $2,500. On January 1, they get their FSA Card with the full amount of money they have chosen to allocate. They have until December 31 of that year to spend the dollars. The FSA contributions are automatically deducted from each pay period, tax free, so it's a small amount each time.
Some small companies also offer FSA plans. Check to see whether yours does.
Health Savings Accounts
Like an FSA, a Health Savings Account (HSA) allows you to use your pre-tax investment for LASIK and some other eye care services.
A Health Savings Account is available to people enrolled in a high-deductible health plan (HDHP). The funds contributed to a HSA are not subject to federal income tax at the time of deposit. In an HSA, funds can roll over and accumulate year to year if not spent.
HSAs can be funded by the employee and/or employer. The annual contribution limits for 2016 are $3,350 for an individual and $6,750 for a family. The accounts are owned by the individual and can be used pay for any qualified medical expenses at any time without federal tax liability or penalty.
Withdrawals from an HSA for non-medical expenses are taxed. They are treated like the funds in an individual retirement account (IRA) in that they may provide tax advantages if taken out after retirement age. They incur penalties if taken out earlier.