What Are Flex Dollars?

Schools or employers will issue flex dollars for purchasing items such as meals, covering health costs, or other expenses. Flex dollars are usually either an electronic currency or a portion of an employee's wage structure. Flex money accounts typically work on a declining balance system similar to a debit card. An individual using the flex dollar account decides how to spend funds; whenever funds are spent, it reduces the account balance.

Key Takeaways

  • Schools or employers will issue flex dollars for purchasing items such as meals, covering healthcare costs, or other expenses.
  • Flex dollars are sometimes a portion of an employee's wage structure or benefits plan.
  • Universities and other schools will use flex dollar accounts to facilitate students' purchase of food and snacks under the school's meal plan.

How Flex Dollars Work

There are two common uses for flex dollars. The first is in a university or other educational setting. The second use is employer-issued funds for the elective use by an employee. 

Universities and other schools will use flex dollar accounts to facilitate students' purchase of food and snacks under the school's meal plan. Flex dollars are usually intended for in-between-meal food purchases. Most tuition plans will include a separate overall meal plan which covers a set number of meals each month. The flex spending plan works in conjunction with the standard program to cover smaller purchases.

Typically, an electronic encoded, wallet-sized debit card stores information for the flex dollar account. The storage card may also be the student's school identification card. The card is linked to the account and is used through a card reader or an online system. Debit cards that carry flex dollars eliminate the need for students to carry cash for small purchases.

Some schools have on-campus dining establishments that offer discounts for students paying with flex dollars. Also, many on-campus vending machines accept flex dollar cards. Students or parents may check the account balance and add funds to a flex dollar account through an online portal. 

Employees may also be granted flex dollars by their employer as a part of their wages or benefits package. One common usage of flex dollars is for an employee's health insurance spending plan, also called a flexible spending account (FSA). An FSA is a type of savings account that provides the account holder with specific tax advantages. Set up by an employer for an employee, the account allows employees to contribute a portion of their regular earnings to pay for qualified expenses. In most cases, these funds are reserved for medical expenses, although they may also be used to cover dependent care expenses.

With FSA accounts, employees have the flexibility to choose their benefits from a menu of possible plans. The design of some plans focuses on employees with families, while others focus on single employees. Employees decide how to spend their allotted flex dollars until they are used up. FSA accounts allow employees to assign coverage to only the benefits that they feel are most necessary. 

Some companies provide basic benefits coverage and may add flex dollars as an option for better coverage. It is up to the issuing company or organization to determine what happens to unused flex dollars. For example, some organizations will allow flex dollars to be rolled over into the next calendar or billing year, while others will operate under a policy that mandates flex dollars must be used within a certain time frame or they are forfeited.

Flex Dollars Example

For example, assume an employee receives $1,000 each year in flex dollars to spend on dental, vision, and prescription drug costs that their employer's health plan doesn't cover.

The employee may choose to divide the funds evenly over the course of the year, use the flex dollars as costs arise, or use the whole amount on one large bill. If a dental emergency comes up, they may decide to use the entire $1,000 at one time to help pay the dental bill. Or the employee may use a portion to help with the dental bill–for example, $500–and leave the other $500 available for other dental, vision, or prescription bills that come up over the rest of the year.