How does a flexible spending account work?
At the beginning of each year, you determine how much you want to contribute to your FSA. Some employers may also contribute to FSAs, but the total annual amount cannot exceed the allowable limit. Each year, the federal government determines the maximum annual contribution allowed for an FSA (the 2020 limit was $2750).
To make a transaction, many FSAs supply you with a debit card to use for purchases and co-pays. Otherwise you can submit the receipts to your employer for reimbursement from your FSA. Either way, it’s imperative to save receipts from approved purchases, appointments, and procedures.
One of the perks of an FSA is that the annual amount is available immediately for approved costs. This means you don’t have to accrue the amount each month; however, if you change companies mid-year and have used all of your FSA funds, you may owe your former employer the difference. Similarly, if you leave your company, you forfeit any unused funds in the FSA because the employer owns the account.