Saving Grace Period for Flex Accounts

Make the most of any money remaining in your 2009 FSA.

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.

Kimberly Lankford
Contributing Editor, Kiplinger's Personal Finance

As the "Ask Kim" columnist for Kiplinger's Personal Finance, Lankford receives hundreds of personal finance questions from readers every month. She is the author of Rescue Your Financial Life (McGraw-Hill, 2003), The Insurance Maze: How You Can Save Money on Insurance -- and Still Get the Coverage You Need (Kaplan, 2006), Kiplinger's Ask Kim for Money Smart Solutions (Kaplan, 2007) and The Kiplinger/BBB Personal Finance Guide for Military Families. She is frequently featured as a financial expert on television and radio, including NBC's Today Show, CNN, CNBC and National Public Radio.