Healthcare FSA for Pregnancy & Baby: How Much to Put In?

It is worth having a Healthcare Flexible Spending Account (FSA) during pregnancy because your prenatal care, childbirth, and newborn baby generate an ongoing stream of eligible tax-saving spending!

However, you risk losing any unspent funds.

An expectant couple with a Gross Income of $10,000 could generate up to $2,144 in tax savings if both parents elect the annual maximum ($2,750) because their cumulative marginal tax rate could total 39% or more.

  • Federal: 22%
  • FICA: 7.65%
  • State: 9.63% (California)

Follow along as we break down how much you should add to your FSA when pregnant, given the birth of a newborn is a qualifying event, possible job termination during maternity leave, and grace period and carryover provisions.

How Much to Put in FSA for Pregnancy

The estimate of predictable qualified expenses determines how much money pregnant women should put in their Flexible Spending Account during their annual open enrollment (typically in November or December).

The FSA use-it-or-lose-it rule suggests contributing just enough to cover the expenses you expect to incur: the eligible pregnancy items. Later, you can adjust the amount higher during a qualifying life event: to cover the unreimbursed costs of your newborn baby.

Eligible FSA Pregnancy Items

First, write out a list of FSA-eligible pregnancy items you will need to buy to estimate your predictable expenses: the amount you expect to spend when things go according to plan.

  • Prenatal Care
    • Birthing classes
    • Diagnostic testing: sonograms, fetal monitors, etc.
    • GYN exams
    • Lamaze classes
    • Smoking cessation
    • Prescription prenatal vitamins
    • Therapeutic pregnancy pillow
    • Maternity support belt
  • Childbirth
    • Doula or midwife
    • Birthing center
    • Hospital labor & delivery
      • Deductible
      • Co-insurance
      • Copayments
    • Postpartum Care
      • Tubal ligation
      • Breast Pumps
      • Breast milk storage bags
      • Lactation consultants

Ineligible FSA Pregnancy Items

Also, ignore pregnancy-related expenses that are FSA ineligible. You do not want to over-contribute and leave money in your account that the plan administrator will not reimburse.

Some products never qualify, while others require a letter of medical necessity or prescription from a doctor, which may not be foreseeable during open enrollment. 

Not EligibleMedically Necessary Letter

Not Eligible

Medically Necessary

Maternity clothes

Chiropractic adjustments

Maternity bras

Prenatal massage

Qualifying Event

Becoming pregnant is not an FSA qualifying event. However, the birth of your newborn baby does allow you to make election changes mid-year. You have the opportunity to boost your contribution in response to unexpected circumstances.

You may want to put more money in after birth if your baby has serious health problems or begins life in Neonatal Intensive Care (NICU). You may need to pay a second insurance deductible and incur higher expenses than anticipated.

In such cases, you may want to consider maxing out your contributions as your expenses could easily surpass these figures when a low-birth-weight or premature baby requires specialized care.

  • Individual: $2,750
  • Married Couple: $5,500

Contributing to a Dependent Care FSA is another opportunity to boost your tax savings. The qualifying life event allows you to cover child care expenses should both parents choose to continue working.

FSA during Maternity Leave

Any plans to quit your job after maternity leave can influence how much money to put in your Flexible Spending Account during open enrollment. Invest time learning arcane rules that frequently come into play.

Don’t let FSA fine print catch you unaware of these critical consequences.

FMLA Contributions

IRS rules do not allow you to claim FSA reimbursement during FMLA (Family Medical Leave Act) if you are no longer making payroll deductions – which is common during unpaid maternity leave.

Therefore, if you want to claim reimbursement for childbirth and postpartum care expenses, you will need to continue additions via one of these methods. [1]

  1. Take paid leave (cash in on banked sick & vacation time)
  2. Prepay FSA contributions before your due date
  3. Pay-as-you-go by sending money to your employer
  4. Agree in advance with your employer to catch-up

Your access to health insurance during FMLA follows similar rules, and you do not want to lose coverage shortly after the birth of your baby.

Quitting your Job

Many new mothers decide to quit their jobs during maternity leave to spend more time with their newborn baby – especially if their infant is born with a severe medical condition.

FSA fine print comes into play when new parents choose not to return to work.[2]

How Much to Put in FSA for Newborn

Your forecast of predictable qualified expenses tells you how much to put in your Flexible Spending Account during open enrollment when anticipating the birth of a perfectly healthy newborn baby.

Once again, you want to distinguish between eligible and ineligible expenses so that you do not over-contribute. At the same time, FSA rollover or grace period rules allow some wiggle room.

Eligible FSA Baby Items

Prepare a listing of FSA-eligible baby products and supplies you will purchase to forecast your predictable expenses.

  • Circumcision
  • Thermometer
  • Tylenol
  • Baby breathing monitor
  • Pediatrician visits

Ineligible FSA Baby Stuff

Once again, ignore baby-related expenses that are FSA ineligible. You do not want to over-contribute and leave money in your account that the plan administrator will not reimburse.

Some products never qualify, while others require a letter of medical necessity or prescription from a doctor, which may not be foreseeable during open enrollment. 

Not EligibleMedically Necessary Letter

Not Eligible

Medically Necessary Letter

Car seats

Potty training pants

Cribs

Digital scale

Basinet

Humidifier

Stroller

Diapers

Monitoring cameras

Formula

Wipes

Umbilical cord blood banking

Bottles & nipples

 

Teethers

 

FSA Grace Period or Carryover

Finally, the FSA rules for left-over expenses at the end of the plan year can influence your contribution decision during the annual open enrollment. Your employer might offer one of two options that provide extra wiggle room.

  1. Grace period (2 ½ months) is an extended time of coverage
  2. Rollover up to $550 into the next plan year

In summary, an FSA offers a great way to lower your after-tax costs for the predictable expenses associated with pregnancy, childbirth, postpartum care, and baby items. Accurate forecasts minimize the bite of the


Article Citations:

[1] 26 CFR § 1.125-3 FMLA & Cafeteria Plans

[2] Business Plans: Terminated Employees & FSA