Flexible Spending For The Military

The 2010 Defense Authorization Bill contains a very interesting provision that may help military families stretch their dollars a little further by allowing them to utilize a pre-tax Flexible Spending Account (FSA)  to pay for certain expenses, usually health care and child care.FSAs are offered by private and government employers and can be a huge benefit if your family pays taxes and  has child care and/or medical costs not covered by Tricare.  I’ll use my family as an example.  In a usual year, we are in the 15% tax bracket.  (I’m really just estimating here, because it seems we never have a “usual” year.)  We also spend about $1000 on child care and about $2000 on non-covered medical expenses (mainly a lot of glasses.)  If we reduce our taxable income by $3000, our tax bill would go down $450.  We’re spending the money anyway, it would be nice to be able to do it with pre-tax dollars.

Eighteen senators sent a letter to President Obama, urging him to work with Secretary of Defense Gates to ensure that this benefit is organized promptly.  Let’s all hope that it happens soon!

About the Author

Kate Horrell
Kate Horrell is a military financial coach, mom of four teens, and Navy spouse. She has a background in taxes and mortgage banking, and a trove of experience helping other military families with their money. Follow her on twitter @realKateHorrell.
  • Jack

    I have been looking all over for a bill that has what you described in it, and have yet to find anything. Can you please tell me what bill it is. (H.R. ####)


  • Thanks for the question, Jack. The National Defense Authorization Act for Fiscal Year 2010 is H.R. 2647. You can find the full text at http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cg… . The reference to Flexible Spending Account can be found in Section 663, Sense of Congress on establishment of flexible spending arrangements for

    the uniformed services, which is located in full on page 182 of the Act.

  • Coastie Bob

    Yes, a year later…we are still waiting! This is so typical of the Military and Fed Gov’t overall – it was the same way – years to get us into TSP. Now it is years waiting for the ROTH option in TSP as well. The law is passed…the damn finance offices have no clue on how to implement it because they have the same old fogy’s working there that have worked their forever!

    • KateKashman

      I’m with you, Coastie Bob. I would really, really like them to get this implemented sometime during my military lifetime.

      I guess I’m dreaming if they will extend this to retirees, huh?

  • Any update on this? Has the DoD implemented flexible spending accounts for military members?

    • KateKashman

      No, Paul, unfortunately this is still dead in the water. Frustrating, isn’t it?

  • vern Waldrip

    I am 73 yars old, MCPO,USN,RET. Am on Medicae and Tricare for Life with my spouse. Two days ago she was seen at a local civilian hospital and diagnosed with upper respitory infection and given a prescription for an enhaler. She was referred by a Pharmacist from Walgreens that they no longer coulld fill them bu recommended The Medicine Shoppe. When I got the bill my copayment was $17 and a note on the bottom of the receipt listing an item (H) — FLEXIBLE SPENDING ACCOUNT ITEM. When asked about this the pharmacist said I would have to contact Express Scripps. Is this a legal charge?

  • Jeff

    so where is this? When you google active duty military FSA, if looks like the Navy is allowed to participate in FSAFEDS. Is this true? If so, can the Army?