The year is ending, and for many, that means a ticking clock on their Flexible Spending Account (FSA) funds. Millions of Americans contribute pre-tax dollars to FSAs to cover eligible medical expenses. But the deadline to use these funds is fast approaching, and many fail to utilize their hard-earned savings before they vanish. This article will guide you through common mistakes people make when trying to spend down their FSA balances before the deadline and provide actionable steps to avoid losing a single penny.
Key Takeaways: Maximize Your FSA Before the Deadline!
- Don’t Panic!: You might have more time than you think – check your plan’s specific details for grace periods or carryover options.
- Explore Health Tech Options: Many wearable health devices and other technology are FSA-eligible. But verify eligibility with your administrator beforehand.
- Over-the-Counter (OTC) & Menstrual Products: Since the 2020 CARES Act, you can use FSA funds for OTC medications and menstrual products, significantly broadening your options.
- Keep Receipts!: Always keep your receipts as documentation, even if not explicitly required; it protects you in case of later discrepancies.
1. You Think You’re Running Out of Time to Spend Your FSA Money
The December 31st deadline looms large, but many employer plans offer flexibility. Don’t assume your FSA funds expire on December 31st. Your company’s policy dictates the exact expiration date. Contact your HR department or FSA administrator for clarification. “The most common plan year is January to December,” says Rachel Rouleau, chief compliance officer at FSAStore.com, “but it could end on any month, depending on your employer’s plan.”
Grace Periods and Carryovers: Understanding Your Options
Inquire about possible grace periods. Rouleau explains that a “two-and-a-half-month grace period at the end of your plan year” allows using funds beyond the official deadline. For a December 31st deadline, this means you could use 2024 funds until March 15th. Additionally, explore carryover options, permitting you to roll over some or all of your remaining balance into the next plan year. However, remember that employers can offer either a grace period or a carryover, but not both, according to the IRS. Clarify these options well in advance to avoid missing out.
2. You Haven’t Spent Your FSA Dollars on Health Tech Yet
The world of health technology presents many FSA-eligible options. Websites like FSAStore.com and Amazon’s FSA Store showcase wearable technology such as blood pressure monitors and digital scales, fitting the IRS’s definition of healthcare expenses. However, always double-check with your FSA administrator to ensure the item’s eligibility, as restrictions might apply.
Letters of Medical Necessity: Clearing the Path to FSA-Eligible Purchases
Some higher-priced items may require a “letter of medical necessity” from your doctor, proving the item’s need for treatment. Nery Solano, head of consumer marketing at TrueMed, emphasizes, “The big unlock is the letter of medical necessity.” TrueMed connects users with practitioners for these letters for items such as exercise bikes, supplements, and even cold plunge pools. You can also request this letter from your primary care physician.
3. You Don’t Use Your FSA for Over-the-Counter Medications and Menstrual Products
Traditionally, FSA spending was limited to specific medical services or products. However, the 2020 CARES Act drastically expanded the possibilities. Now, you can use your FSA funds to purchase virtually any over-the-counter medication, as well as menstrual products (tampons, pads, liners). This opens up a wide array of options for last-minute spending.
Documentation: Retaining Receipts for Your Protection
Even if your plan doesn’t explicitly require upfront documentation, Rouleau strongly advises keeping all receipts. “You should always keep your receipts, no matter what,” she stresses. This protects you from potential reimbursement issues later. Thorough record-keeping can save you costly headaches even when you follow all the rules.
