FSA Perks

There are only 25 days until the annual open season for federal benefits elections begins, and it might be wise to use this time to evaluate whether a flexible spending account is right for you.

FSAs allow you to make pretax contributions to a Federal Deposit Insurance Corporation-protected savings account to pay for medical and dependent care. Since the contributions are not subject to federal income and Social Security taxes, this benefit could mean significant savings for federal employees who accurately estimate their annual expenses.

Retirees, by law, are not allowed to contribute to the program. Active-duty military members also are ineligible, and not all federal agencies participate in the program.

If you do qualify, you will have to re-enroll in FSA annually during open season. In 2008, open season runs Nov. 10 to Dec. 8.

Money you put into the FSA for one year does not roll over to future years, so if you don't use it, you lose it. But unlike some private sector plans, the federal plan has a two-and-a-half-month grace period for employees to spend money left over from the previous year.

"That means I have all of 2009 plus [the first] two-and-a-half months in 2010 to spend that annual election," says Laura Lawrence, chief of the FSA, Life and Long Term Care Insurances Group at the Office of Personnel Management. "If you estimate your annual expenses and use that extra time as a buffer, the use-it-or-lose-it rule is there but it shouldn't bite anybody."

There are two types of flexible spending accounts: HCFSA for health care and DCFSA for dependent care, and employees now can set aside up to $5,000 a year in both options.

HCFSAs can be used to pay for qualified medical costs and health care expenses that are not covered by the Federal Employees Health Benefits Program or other insurance. Such accounts cannot be used for paying any type of insurance premiums, including those for long-term care insurance.

Many over-the-counter medicines can be paid for with money from an HCFSA, however, including nonprescription antacids, allergy medicines, pain relievers and cold medicines. Other acceptable uses include braces, acupuncture, childbirth classes, learning disability treatments, substance abuse therapy, some infertility treatments, pregnancy tests, laser eye surgery, contacts, diabetic supplies, flu shots, psychologists, reading glasses, speech therapy and sunscreen.

Lawrence said employees enrolled in 16 of the health plans offered in FEHBP, including Blue Cross Blue Shield, also can participate in paperless reimbursement for eligible health care expenses under their HCFSA. This means that rather than file a claim every time you visit the doctor or fill a prescription, FEHBP will file the claim for you, and you'll see the reimbursement in your bank account.

Meanwhile, money from a DCFSA can be used for child care or dependent adult expenses, which allow you or your spouse to work, look for work or attend school full-time. You could use DCFSA, for example, to pay for a babysitter, summer camp, or before and after school care for children younger than 13. You also could use the DCFSA to pay for an adult dependent's day care or a housekeeper whose duties included caring for an eligible dependent.

If you are currently receiving a child care subsidy, then you must make sure the total you elect to save through the FSA combined with the total of your child care subsidy does not exceed the $5,000 limit.

Use the savings calculator on the FSAFeds Web site to determine how much money you can save annually by opening an FSA. Actual savings will vary based on your individual tax situation, and on whether you are covered by the Civil Service Retirement System or the Federal Employees Retirement System.

"The message is, 'This is how you can save money,'" Lawrence says. "It's almost like getting a [pay] raise."

SES Pay

Federal executives will be eligible to receive a maximum cost-of-living increase of 2.8 percent in 2009.

This means that Senior Executive Service members in agencies with OPM pay-for-performance certification can make up to $177,000 a year. The 2008 cap was $172,200. Employees in agencies without certification will have an earning potential of $162,900, up from $158,500.

The 2.8 percent increase is similar to a cost-of-living increase, but SES employees must meet certain performance expectations to qualify. In 2004, the SES began rolling out a pay-for-performance system, which qualifies outstanding employees for higher salaries.

The annual executive schedule increase is not decided by the same political process as the General Schedule pay hike. Instead, it is calculated from a formula linked to the Labor Department's annual Employment Cost Index.