New Rules for Your Flexible Spending Account

Many companies offer more flexibility on what was once a use-it-or-lose-it December 31 deadline for using FSA money. (Plus, higher contribution limits.)

Question: Do I have to use up all of the money in my flexible spending account by December 31? If so, what kinds of medical expenses can I use it on in the last few weeks of the year?

Answer: Ask your employer about the rules for your flexible spending account plan. In the past, most plans had a use-it-or-lose-it deadline of December 31 for spending tax-free FSA money for out-of-pocket medical expenses. But some employers now give you until March 15 of the following year to use the money, or let you roll over $500 from one year to the next.

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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.