Vast Majority of Workers Skip Tax-Saving FSAs

You must enroll in FSAFEDS each year to participate. Enrollment does not automatically renew.

You face contribution limits: $5,000 for a health-care account and $5,000 for a dependent-care account. Balances may not be transferred between the two accounts.

You must "use it or lose it." The Internal Revenue Service requires FSA participants to forfeit unused balances.

A number of Diary readers have said they refused to sign up for FSAs because they feared losing part of their salary allotment at the end of the year. But such fears should be eased by this year's IRS change in FSA rules, which provide what Titus called "a 2 1/2 -month 'grace period.' "

(For example, federal employees have until March 15, 2006, to spend down this year's accounts, and until May 31, 2006, to submit reimbursement claims for 2005 expenses.)

Bonnie B. Whyte , president of the Employers Council, advises reluctant employees to start off with a small payroll deduction, such as $500, "to get the hang of the system."

Most employees, she said, will discover they routinely spend that much and more for products and services that qualify for FSA coverage.

People with children, for example, can estimate their day-care expenses. A review of credit card bills and checks can provide a sense of how much gets spent on over-the-counter medicines, health insurance co-payments and deductibles.

It may be more than you think. A typical family of four has out-of-pocket medical expenses of $2,035, according to Milliman Inc., a consultant on employee benefits.

For more information about FSAs, check out the federal program's Web site ( http://www.fsafeds.com ), which provides a calculator, and a commercial site sponsored by McNeil Laboratories ( http://www.FSAandYou.com ).

As Whyte said, "Employees are missing a really good bet if they are not participating in an FSA."

E-mail:barrs@washpost.com