Ask Kim

Sweet Spot for Flexible Spending Accounts

If you have until March to use 2008 FSA money, you can pool it now with 2009 funds to cover the cost of high-cost medical procedures.

By Kimberly Lankford, Contributing Editor, Kiplinger's Personal Finance

January 26, 2009

I'm going to have Lasik eye surgery soon. Because it's so early in the year, I wonder how much money from my flexible spending account I can use to pay for the operation. Is it just the amount I’ve contributed so far in 2009, or can I use the full amount I plan to set aside this year?

You're in luck. Although you've been contributing to your 2009 FSA for only a few weeks this year, you can use the full amount at any time. So if you signed up to contribute $3,000 for the year (the annual maximum allowed in most employers' medical FSAs), you'll be able to use the full $3,000 at any time during the year, even if you’ve contributed only a few hundred dollars from your paychecks so far.

And you may be able to use even more money from an FSA this time of year. If your FSA has a grace period of two and a half months -- as many plans do -- then you have until March 15, 2009, to use your 2008 FSA money. If you didn't use any money from your FSA in 2008 and plan to contribute the maximum in 2009, then you could have as much as $6,000 in tax-free FSA money to use by March 15.

You can use the FSA money for most medical expenses that insurance doesn't cover. Combining the two years' maximums could give you a large chunk of money to use for high-price procedures, such as Lasik eye surgery or oral surgery. Also, if your spouse has an FSA through work, you might be able to pool your money. Talk to your administrator for the rules.

For a full list of eligible FSA expenses, see IRS Publication 502 Medical and Dental Expenses. Also see 25 Ways to Spend Your Flex Account.

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