Saving Grace Period for Flex Accounts

If your employer is among the growing number of companies that offer a grace period of two and a half months to use up flexible spending account dollars, you have until March 15 to spend any money left in your 2009 account -- or forfeit the balance. To sop up leftover funds, most people go on a last-minute spending spree, filling prescriptions for drugs, eyeglasses and contact lenses; stocking up on economy-size bottles of pain relievers and over-the-counter cold and allergy medications; or getting their teeth cleaned.

But if you think big, you may have an opportunity to tap an extra-large pot of money before the deadline. Between January 1 and March 15, you can combine leftover 2009 money with the full amount earmarked for your FSA in 2010.

Say you plan to contribute $3,000 to your FSA in 2010 and you still have $1,000 left over from 2009. That gives you $4,000 tax-free to spend now on big-ticket items, such as laser eye surgery or dental work, even though you may have contributed only a few hundred dollars so far this year.

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Don’t have significant bills in your immediate future? You can spend FSA funds on almost any medical expenses that aren’t reimbursed by your health insurance, whether they be co-payments and deductibles, a weight-loss program prescribed by your doctor, or a smoking-cessation program. And in most cases, you can use the money for your dependents’ medical expenses as well as your own, even if they aren’t covered under your health-insurance policy. Most employers give you a few extra weeks after the March 15 deadline to submit expenses for reimbursement.