Benjamin Franklin famously wrote, “In this world nothing can be said to be certain, except death and taxes.” If Flexible Spending Accounts had existed in his time, he might have added one more certainty: If you use an FSA, you’ll save money on your healthcare expenses.
Yet despite rising healthcare costs and tighter budgets, most federal employees are leaving this guaranteed savings opportunity on the table. In fact, only one in five participate in the FSA program, meaning most employees are paying more than they need to.
The good news? FSAs aren’t complicated, and you don’t have to be a benefits expert to take advantage of them.
In this article, we’ll break down how they work, share a simple strategy to help you use one successfully (even if it’s your first time), and show why this is one of the easiest ways federal employees can immediately reduce their out-of-pocket healthcare costs.
How do FSAs work?
The FSA is a pre-tax savings account for out-of-pocket healthcare expenses. The money comes out of your paycheck before taxes are calculated, which lowers your taxable income, and that’s where the savings come from. For most federal employees, the combined federal and state tax benefit works out to roughly 30 cents saved for every dollar spent through the FSA.
To put that in concrete terms: A federal employee who contributes $2,000 to their FSA would see $76.92 taken out of each bi-weekly paycheck and save $600 in taxes over the course of the year.
FSAs for federal employees are administered by FSAFEDS, and you can use its savings calculator if you want to run the numbers for your own contribution level and tax rate. In 2026, the contribution limit is $3,400. Enrollment happens during FSA Open Season, which runs on the same schedule as Federal Employees Health Benefits Open Season each fall. If you’re a new federal employee, you don’t have to wait; you can enroll right away.
What can I use my FSA for?
FSA eligible expenses include more items than most people realize. The core categories include:
Medical: Copays, coinsurance, deductible expenses and other out-of-pocket costs (note: plan premiums are not eligible).
Dental: Preventive care (exams, cleanings, x-rays), restorative treatment (fillings, crowns, bridges) and orthodontia.
Vision: Eye exams, eyeglasses, contact lenses and supplies, prescription sunglasses and laser eye surgery.
Over-the-counter pharmacy: Medications, bandages and a wide range of treatment products.
There are other eligible items that are less well known. Transportation costs to and from qualified healthcare appointments are reimbursable at a rate of $0.205, and any parking fees for those medical appointments are eligible too. And if a smartwatch is determined by your doctor as medically necessary, you can seek reimbursement up to $125.
FSAFEDS has a searchable lookup tool on their website, and it’s worth a few minutes to browse to have a better understanding of how to use your FSA.
How reimbursement works
There are two ways to get reimbursed for eligible expenses: paperless reimbursement and manual claims. For most people, paperless reimbursement is the better option, and worth setting up from the start.
With paperless reimbursement, your FEHB or FEDVIP plan automatically forwards your claims to FSAFEDS each week, and reimbursement lands directly in your bank account within two to three weeks, no forms or receipts to upload. Most FEHB and FEDVIP plans participate; you can check whether yours does here. You must actively opt in each year during FSA Open Season re-enrollment, or you can sign-up through your FSAFEDS account at any time.
If your plan doesn’t participate, or if you have an expense that isn’t automatically forwarded, you can file a manual claim through the FSAFEDS website or mobile app. The app is the more convenient route because you can photograph your itemized receipt, upload it and submit the claim details all from your phone.
How those with an HSA can benefit from a Limited Expense FSA
If you’re enrolled in a High-Deductible Health Plan (HDHP) with a Health Savings Account (HSA), IRS rules bar you from also enrolling in a standard healthcare FSA. But HSA holders can access the Limited Expense Health Care FSA (LEXHCFSA), which covers dental and vision expenses only.
This pairing is worth considering. Dental and vision costs, like routine cleanings, exams, glasses and contacts, are among the most predictable healthcare expenses you’ll have, which makes them ideal candidates for FSA planning. By routing those costs through your Limited FSA, you preserve your HSA funds for medical expenses and, more importantly, keep that money invested and compounding over time.
Use it or lose it
One of the biggest hesitations people have about FSAs is the use-it or lose-it rule: If you set aside more than you spend on qualified expenses in a year, you may lose some of the difference. That’s a real risk, and it’s worth taking seriously when you decide how much to contribute.
However, your budget estimate doesn’t have to be perfect. You can carry over up to $680 in unused FSA funds from one plan year to the next, as long as you stay enrolled. That cushion means a small miscalculation won’t cost you, and it takes a lot of pressure off the budgeting process.
First time FSA strategy
If you’ve never enrolled, contribute exactly the carryover maximum of $680 and nothing more.
Why does this work? Think about what counts as a reimbursable expense: doctor copays, prescription drugs, dental and vision care, and even over-the-counter medications. Most federal employees spend at least $680 on those categories in a year. If you do, you’ve saved money on every dollar, guaranteed. And in the unlikely event you have an expense-free year, you can roll the entire $680 into the next plan year, as long as you stay enrolled.
Either way, you come out ahead. That’s about as close to a no-risk investment as you’ll find.
In summary
Rising healthcare costs aren’t going away, and the FSA is one of the few tools available to federal employees that reliably puts money back in your pocket. With the year-to-year carryover taking the pressure off exact budgeting and paperless reimbursement handling most of the administrative work automatically, the barriers that once made FSAs feel risky or complicated have largely been removed.
If you’re an active federal employee who isn’t enrolled, Open Season is your opportunity to change that. Start small if you’re uncertain. The $680 carryover strategy outlined above is a no-risk entry point, and you can build from there as you get comfortable tracking your expenses.
One important note: FSA eligibility is limited to active federal employees. Because FSAs are funded through pre-tax salary deductions, annuitants are not eligible to participate as annuities are not considered salary by IRS rules.
Active federal employees should take advantage of these tax savings while they last.
I encourage you to send in your FEHB questions, and I look forward to answering them with advice to help you save money or better understand how FEHB works.
Kevin Moss is a senior editor with the Guide to Health Plans for Federal Employees provided by Consumers’ Checkbook. Watch more of his free advice and check here if the Guide is available for free from your agency. You can also purchase the Guide and save 20% with promo code FEDNEWS.
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