As a new year approaches, it's time to make your employee benefits work for you. Selecting the best benefits saves money, helping you get the most from your paycheck.
While there are many employee benefits, here are two that can stretch your health care dollar.
Flexible spending accounts
Flexible spending accounts, or FSAs, allow individuals to set aside money from each pay period in a pre-tax account. As the year rolls on, you can tap that account for medical expenses. Such expenses include co-pays, eyeglasses, prescription drugs and many others. Because the money is not taxed, an FSA helps you keep more of your paycheck in your wallet.
FSA money is available beginning on the first day of the year. For example, let's say you decide to contribute around $1,000 per year, or $83 per month. If you incur a $1,000 medical expense in January, you can tap the full $1,000 for reimbursement even though you've only accumulated $83 in your account during that first month.
Keep in mind, you have to use the funds before the end of the year. However, a new rule allows companies to give their employees the option of carrying over $500 of FSA money that is not used by Dec. 31.
Health savings accounts
With the rising cost of health care, many people are looking for ways to reduce health insurance premiums. One way is to take advantage of a health savings account, or HSA. An HSA is similar to a flexible spending account, but has a few key differences.
The great advantage of an HSA is that -- unlike an FSA -- you do not have to forfeit the money that you do not use within the benefit period. In fact, you can let the money continue to build as part of your retirement savings.
HSA contributions are made on a pre-tax basis and grow tax-free. If the money in the account is used for qualified medical expenses, withdrawals also are not be taxed. In order to take advantage of an HSA, you have to be enrolled in a high-deductible health insurance plan.