Use it or Lose it: Flexible Spending Accounts

By Jill Feilmeier on December 26, 2017 in Insurance

If someone offered us free money to spend, most of us would take it. Now imagine that the money is actually your own money that you have saved all year and if you don’t spend it, you lose it.

That’s the scenario many of us face with Flexible Spending Accounts (Arrangement) or FSAs. Some employers offer this benefit. It allows you to withhold up to $2,600 per year[1] from payroll to deposit pre-tax into an FSA to spend on non-covered medical expenses or to complement existing insurance plans. In 2018, the amount changes to $2,650. These funds can be used for a variety of health care expenses including non-covered medical bills, like co-pays, equipment, materials, health aids and prescriptions or larger one-time expenses like non-covered dental procedures, eye glasses, orthodontia or hearing aids.

The catch is that your FSA money has to be spent by a deadline, usually the end of the year. Employers may choose to add a rollover option to your plan. This means either the employee may rollover up to $500 of their FSA dollars into the new calendar year or any rollover dollars must be spent by March 15. Employers may choose either of those rollover options or neither. Check with your employer to find out the rules for your FSA plan.

Great health and wellness intentions in January are often delayed and suddenly you are facing a use it or lose it scenario at year-end with your FSA dollars. So, what are the best ways to avoid losing your FSA dollars?

1. Check up. Access your online portals for your insurance provider(s) and your FSA administrator to receive an accurate view of your spending year-to-date. You can download explanation of benefit (EOB) documents and calculate what you have paid out-of-pocket for non-covered expenses. As you determine what you have left to spend on your FSA account, you can also get a good budget estimate what you may want to consider for next year’s enrollment.
2. Step up. Stop procrastinating and make the call. If you planned to use your FSA on an eye exam for new glasses or contacts, visiting the dentist for a checkup or recommended procedure or seeing a mental health counselor, make the appointments today and commit to your overall health for the future.
3. Stock up. If your doctor has prescribed over-the-counter medications such as a daily aspirin, acne treatments, antacids or seasonal allergy medication, you may be able to purchase these products in bulk with your FSA dollars. Check with your doctor and the FSA eligibility list for more information. Other non-prescribed products like contact lens solution, blood glucose monitors and non-prescription reading glasses are eligible as well.
4. Save up. Many first aid and health products can be purchased with your pre-tax FSA dollars. Have a student heading off to college next year? Purchase a first aid kit and a vaporizer for their dorm room. Taking the family on a tropical vacation this winter? Purchase sunscreen and motion sickness aids. Every day aches, pains and injuries often require items like bandages, ice packs, heating pads and joint braces. Many of these products are FSA eligible. Just make sure to keep your receipts for your expenses.

No one wants to lose their hard-earned money. With a little research and planning, you can check up, step up, stock up and save up with your FSA dollars.

[1] https://www.shrm.org/resourcesandtools/hr-topics/benefits/pages/2017-fsa-contribution-limits.aspx