FSAs are a cost-saving way to set aside funds to pay for healthcare services and items that are not covered by insurance, such as dental care, orthodontic treatment, doctor co-payments, prescription drugs, and medical supplies. All the funds accumulated in the accounts are tax-free. The current law allows individuals to set aside $2,550 per year. A husband and wife whose employers offer the FSA benefit may each set aside up to $2,550 for 2016. A 2013 enhancement to the law allows account holders to roll over up to $500 of unused funds into the following year.
Because orthodontic treatment is one of the few medical expenses one can anticipate, many financial planners include planning for it when working with families. “Orthodontics is something we absolutely discuss in our practice,” says Marguerita Cheng, CFP, a planner with Blue Ocean Global Wealth in Potomac, Maryland. “Our number of adults who are opting for [orthodontic] treatment is growing all the time, making this conversation relevant at all ages. We have many clients in their 40’s and 50’s who are in treatment.”
- 1. An FSA saves you money on taxes.
All FSA contributions are tax-free. “If your family is paying for orthodontic treatment, it’s better to utilize tax-advantaged benefits such as FSAs or HSAs (Health Savings Accounts) rather than simply paying out of pocket,” says Travis W. Freeman, CFP, and president of St. Louis-based Four Seasons Financial Education, a firm that advises employees on how to maximize their benefits. “Never depend on credit cards to pay for treatment. If you must, temporarily lower your 401(k) deferrals, or rely on a home equity loan, and place this cash in your FSA.”
- 2. Many orthodontists will work the “use it or lose it” rule to your advantage.
In most cases you’ll lose most of your FSA stash if you don’t use it at the end of the year ($500 may be rolled over), but many orthodontists will help you use remaining funds to pay for treatment in the current calendar year. “Check with your orthodontist’s office to see if they can help you at year end,” says Morris N. Poole, DDS, president of the American Association of Orthodontists. “This is a good way to ensure that you use all the funds you worked so hard to save.”
- 3. Ask about payment plans. Most orthodontists offer a variety of payment plans to make treatment affordable. In addition, many employers offer dental insurance that includes orthodontic benefits to cover a portion of the fee for care. “Orthodontists are accustomed to working with families that often are juggling other expenses,” says Dr. Poole. “By using a well-planned tax-deferred FSA, combined with payment options offered by the orthodontist and other available benefits, orthodontic care is within the means of most families. The benefits of orthodontic treatment are lifelong, and can be one of the best investments families can make in their health and well-being,” concludes Dr. Poole.
* “FSA Rollover Helps Workers Save, But Few Flex It,” by Beth Pinsker, http://www.reuters.com/article/2014/09/05/us-usa-health-rollovers-idUSKBN0H01XK20140905
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About the American Association of Orthodontists
Founded in 1900, the American Association of Orthodontists (AAO) is the world’s oldest and largest dental specialty organization. It represents more than 18,000 orthodontist members throughout the United States, Canada and abroad. The AAO encourages and sponsors key research to enable its members to provide the highest quality of care to patients, and is committed to educating the public about the need for, and benefits of, orthodontic treatment.
Orthodontists are uniquely qualified specialists who diagnose, prevent and treat dental and facial irregularities to correctly align teeth and jaws. Orthodontists receive an additional two to three years of specialized education in orthodontics beyond dental school at an accredited orthodontic residency program. Visit the AAO’s websites, mylifemysmile.org and aaoinfo.org, for information about orthodontists, orthodontic care and to locate nearby orthodontists.