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Traditionally, the end of the plan year has meant crunch time for using the remaining money in your Flexible Spending Account (FSA). Here are some tips to keep in mind as you spend your account funds.

What is an FSA?

An FSA is a health savings account that allows you to set aside a portion of your pre-tax salary to pay for qualified out-of-pocket expenses such as copayments, deductibles, prescriptions and medical equipment. The account can be set up through your employer's benefit plan, if available. With this plan, your employer makes regular, equal payroll contributions from your paycheck before tax withholding is calculated. A tax advisor can help provide specifics on potential income tax savings.

Flexible spending account rules

The IRS establishes annual maximum contributions to the plan. 

FSAs adhere to a "use it or lose it" rule — you must use the funds within a defined period or forfeit what’s left. Employers can offer a grace period of two and a half months at the end of the plan year for you to submit your requests for reimbursement of eligible expenses. 

Alternatively, your employer may allow you to roll over a certain amount of the momey into the next plan year without affecting your annual contribution limit.

Employers can offer only one of these options, but they're not required to offer either. Check with your human resources department to learn what options may be available to you, regarding your specific FSA.

How does a flexible spending account work?

The trick with an FSA is accurately estimating your upcoming qualified medical expenses for the plan period. If you have money left to spend at the end of the plan year, consider these purchases:

  • Stock up on certain OTC medicines or feminine hygiene products and submit the receipts for reimbursement.
  • Consult your health care practitioner, insurance company and/or local pharmacist about ordering a few extra months' worth of prescription drugs you take regularly. You not only save money, but you save yourself trips to the pharmacy. As with other expenses covered by insurance, anything you pay out of pocket — including deductibles or co-payments — may be reimbursed by your FSA.
  • Buy a new pair of prescription eyeglasses or sunglasses. Don't forget to stock up on eye drops, contact lenses and saline solution. Also consider a trip to the dentist.
  • Get any medical examination or treatment you’ve been putting off. Some FSA plans can be used to cover medical procedures such as acupuncture or chiropractic sessions.
  • If you're ready to give up smoking, invest in nicotine patches and other smoking cessation products.
  • Get any shots, vaccines or immunizations you may need.

Your employer’s human resources department may have a readily available list of eligible purchases, so always check before spending.

The advice provided is for informational purposes only.

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