Health Savings Accounts (HSA)

Your Flexible Spending Account (FSA): Use It or Lose It

If you participate in an employer-sponsored Flexible Spending Account (FSA), now is the time to see how much of your money you’ve spent this year.  These accounts are typically “use it or lose it” plans. Now is the time to get spending—or risk saying goodbye to that cash come December 31.

Types of Flexible Spending Account (FSA)

On average, lose approximately $100 annually in forfeited balances.  There are plenty of ways you can spend those dollars without losing them. With a little advance planning, you can stock up on things you’ll need in the future, all while using money from this year’s account.  Here are a few suggestions on where you can use your flexible spending account.

Medical Expense

This type of Flexible Spending Account typically combined with a high-deductible insurance plan to cover expenses not covered by the policy. You can use this type of FSA to pay your deductible or your copay. You can also use a Medical Expense FSA for dental care, chiropractic treatment, vision-related care, medical devices, and even over-the-counter medications.

Dependent Care

Use funds from a Dependent Care Flexible Spending Account to cover costs relating to minor children under the age of 13. Dependent Care FSA funds can be used for daycare supervision for children of working parents. In some cases, Dependent Care FSA funds can also be used to pay for the care of elderly relatives who live with you as well.

Health Premiums

Companies that do not offer health insurance for their employees can offer Health Premium Flexible Spending Accounts to substitute. Employees can use funds from Health Premiums FSA to cover health insurance premiums. Another alternative is that one member of a family can obtain a family healthcare plan to cover his or her entire family, allowing the other spouse to open an FSA account for his her health-related expenses.

Adoption Assistance

Adoption Assistance Flexible Spending Accounts allow would-be adoptive parents to use the funds to offset some of the sometimes-staggering expenses associated with a legal adoption. These pre-tax funds can be used for any legal expenses associated with adopting a child. The existence of Adoption Assistance FSA funds allows many parents who would not otherwise be able to afford the costs of adoption to do so.

Stock Up on Over the Counter and Prescription Medications

Since cold and flu season is here, visit your local drugstore and stock up on seasonal must-haves. Look at the expiration dates and make sure the items you purchase will be good for at least a year. If you have prescriptions to fill, you can also get reimbursed on any required co-pays.

Purchase Glasses or Contact Lenses

Flexible Spending Account funds can be used for contact lenses, eyeglasses (including sunglasses) and eye doctor fees. What are you waiting for? Your eyes need you.

Other Uses

There are lots of other ways you can spend your flexible spending account money.  These include acupuncture, breast pumps, hearing aid batteries, capital expenses for special equipment installed in a home, and pregnancy test kits. For the full list, see the IRA Publication 502.

Once you spend the money, don’t forget to submit your receipts for reimbursement.  Depending on your employer, some expenses may be submitted automatically, but others will have to be sent in by mail or fax. Check to see what the deadline is for receipt submission—some plans have a deadline of December 31, so you’ll want to send in those receipts as soon as possible.

Use It or Lose It

You contribute to a Flexible Spending Account through pre-tax dollars, with possible matching contributions from your employer. The money in an FSA is tax-free as long as the money remains in the account or you use it to cover health-related expenses. Under original rules instituted by the Internal Revenue Service, you forfeited any funds remaining in your FSA after December 31.

However, under new rules instituted by the IRS, your employer may either allow you to roll over up to $500 from your FSA into the following year or allow a two-and-a-half-month grace period (until March of the following year) to spend the money from your FSA. You can’t do both, and your employer does not have to allow either option.

Ideas for Spending Down Your FSA

If you have a Health Premium Flexible Spending Account and you can afford to do so, consider paying ahead on your premiums for next year. Be sure that your FSA and your insurance plan allow advance payments before doing so, however. Consider health-related expenses that you might have put off from earlier in the year.

For instance, if you haven’t already had one, now is an ideal time to have a flu shot — and pay for it with funds from your Flexible Spending Account. If you have not yet scheduled an annual physical or dental examination, now is a good time to do so. Maybe you have had a physical but you are feeling specific aches and pains. Inquire with your primary care physician about a referral to a physical therapist, massage therapist or acupuncturist.

Remember, medical devices are also eligible for payment through FSA funds. The end of the year is an ideal time to take an assessment of the condition of your medical devices. Replace them if needed. Do you have a physician-recommended humidifier? Do you use catheters or wear glasses? Why not pick up an extra pair of eyeglasses, or a few spare pairs of contact lenses and contact lens solution?