If you have a Flexible Spending Account, there is a deadline coming that costs people real money every year. Most FSA funds do not roll over. Whatever is left in the account on December 31 typically goes back to your employer.
Here is what to know while there is still time to act.
FSA and HSA are not the same thing
A Flexible Spending Account is funded through your employer and generally operates on a use-it-or-lose-it basis. Some plans allow a small carryover into the next year, and some offer a grace period into March, but many offer neither. Your plan documents or your HR department can tell you which applies to you.
A Health Savings Account is yours. The money rolls over indefinitely, it stays with you when you change jobs, and it can be invested. There is no year-end deadline on an HSA, though there is an annual contribution limit worth maxing if you have the cash flow.
The urgency applies to FSAs. If you are not sure which you have, check before December.
How to find out what you have left
Log in to your benefits portal, or call the number on your FSA debit card. Ask two questions: what is my remaining balance, and does my plan have a carryover or a grace period? Those two answers determine how much time you actually have.
What these accounts generally cover
Eligibility is set by the IRS and interpreted by your plan administrator, so specifics vary. Broadly, qualified medical expenses include:
- Office visits and consultations
- Lab work and diagnostic testing
- Prescription medications
- Many medical procedures and treatments
- Certain over-the-counter items, including some that now qualify without a prescription
Treatments aimed at diagnosing, treating, or preventing a medical condition are more likely to qualify than those considered elective or cosmetic. Some items qualify with a letter of medical necessity from your provider. If there is something specific you are considering, ask us and ask your plan administrator before you assume either way.
A smarter approach than spending it down on whatever is left
Every December, people burn remaining FSA dollars on drugstore items because the deadline is days away. That is better than losing the money, but it is not the best use of it.
If you have been putting off looking into something, whether that is comprehensive lab work, a joint that has been bothering you, or a weight and metabolic evaluation, this is the money that was set aside for exactly that.
Timing matters more than people expect
December appointments book up. If you want to use funds this year, the practical window is November into early December, not the last week of the month. Lab work in particular needs time: the draw, the results, and the follow-up visit all have to happen, and the expense has to be incurred within the plan year.
Call the office early if you are working against a deadline and we will tell you honestly what can be completed in time.
One more thing for next year
Open enrollment usually runs in the fall. If you consistently run out of FSA money or consistently have too much left, adjust the election now rather than repeating the same problem next December. And if you are on a high-deductible health plan, look at whether an HSA is available to you, because the rollover alone makes it a better vehicle for most people.
Questions about what applies to your situation are worth asking us directly, and worth confirming with your plan administrator. We can also discuss payment options if your balance does not cover what you are considering.
Call (702) 465-7471 or book a consultation.
This is general information, not tax advice. Your plan administrator determines what your specific account covers.