About 10 percent of federal employees set up flexible spending accounts this year. That leaves a lot of people missing out on a nifty tax break.

Take a look at the math:

Janet Fed earns $50,000 a year. She makes a $2,000 pretax contribution to her FSA, bringing her taxable income down to $48,000. She then pays $11,842 in Social Security and federal income taxes, instead of $12,495.

That's a savings of $653 in taxes.

Janet Fed can use some of the $2,000 she set aside to pay for health care -- prescription drugs, over-the-counter products such as aspirin and pain relievers, orthodontia, eyeglasses, hearing aids and other expenses not covered by her health insurance.

She can put some of the money in a dependent-care account -- for child care, at a day-care center or for a private sitter, to cover late pickup fees from child care, or to pay for adult day care for an elderly parent.

Tax savings are available to federal employees in every General Schedule grade. A GS-5 earning $27,969 -- in the 15 percent tax bracket and including Social Security -- would save $226.50 in taxes by making a $1,000 contribution into an FSA. A GS-14, earning $86,353, in the 28 percent tax bracket, would save $1,782.50 in taxes with a $5,000 payroll deduction for an FSA.

"Federal employees work too hard for their salaries to give any of it away. But that's exactly what happens when they pay for medical or child-care expenses with out-of-pocket dollars, instead of dollars from their FSAFEDS account," said Frank D. Titus, assistant director for insurance programs at the Office of Personnel Management.

Flexible spending accounts have been around since 1978 and are increasingly popular in the private sector. The Employers Council on Flexible Compensation estimates that 20 to 25 percent of private-sector and state and local government employees enroll in FSAs.

FSAs, however, are relatively new to federal employees, and that may account for why only 10 percent of the 1.8 million workers are enrolled. OPM set up the FSAFEDS program in June 2003, with SHPS Inc., a health care company in Louisville, as the administrator. After its launch, OPM combined the annual FSA sign-up with the "open season" for enrollment in the federal health insurance program.

This year, the enrollment season for FSAs and health insurance starts Nov. 14 and ends Dec. 12. There are a few rules to keep in mind:

* 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 21/2-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 (www.fsafeds.com), which provides a calculator, and a commercial site sponsored by McNeil Laboratories (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