spending

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.

A study by the Society of Human Resource Management found that 46% of companies that offer FSAs let you roll over $500 from one year to the next, and 37% offer a grace period until March 15 to use the money (employers can’t offer both the rollover and the grace period). That leaves about 17% of employers without a rollover or grace period.

“In most cases, this is a December 31 deadline, but some companies may operate on a different plan-year schedule,” says Jeremy Miller, CEO of FSAstore.com, an online drugstore that focuses specifically on selling FSA-eligible items. About $450 million in FSA dollars go unspent each year, or about $30 per person, on average, Miller says. People with an end-of-year deadline, though, typically end up with a $200 unused balance, he says.

There are plenty of items you can use the money for before the end of the year. You may have time to make some year-end appointments with the dentist or eye doctor, for example, and use the FSA money to buy glasses, prescription sunglasses, contact lenses and contact lens solution. You can also stock up on eligible drugstore items, such as thermometers, blood pressure monitors, prenatal vitamins, breast pumps, eligible sunscreen (must have an SPF of 15 or higher), hot/cold packs, first aid kids, bandages or orthopedic braces.

Some FSA plans provide a debit card that makes it easy to buy eligible items at the drugstore. You can also look up eligible items and rules (some require a prescription, some don’t) on FSAstore.com’s eligibility list.

Also, next year you will be able to set aside slightly more in your FSA plan. The maximum limit for medical FSAs increases to $2,700 in 2019, up from $2,650 in 2018.

Most Popular

Retirement Income Shouldn’t Depend on the Market; It Should Depend on Math
retirement planning

Retirement Income Shouldn’t Depend on the Market; It Should Depend on Math

The math isn’t as tough as you might think. It all starts with dividing your assets into three different buckets.
May 23, 2022
Your Guide to Roth Conversions
Special Report
Tax Breaks

Your Guide to Roth Conversions

A Kiplinger Special Report
February 25, 2021
Why Are Gas Prices Still Going Up?
spending

Why Are Gas Prices Still Going Up?

The cost of a gallon of gas is heading back toward its March highs. What’s driving the resurgence, and will gas prices go down anytime soon?
May 23, 2022

Recommended

Why Are Gas Prices Still Going Up?
spending

Why Are Gas Prices Still Going Up?

The cost of a gallon of gas is heading back toward its March highs. What’s driving the resurgence, and will gas prices go down anytime soon?
May 23, 2022
Tax Changes and Key Amounts for the 2022 Tax Year
tax law

Tax Changes and Key Amounts for the 2022 Tax Year

Americans are facing a long list of tax changes for the 2022 tax year. Smart taxpayers will start planning for them now.
April 29, 2022
How Our Family Fights Inflation
Budgeting

How Our Family Fights Inflation

Millennials typically spend more than other generations on certain expenses that have been increasing most rapidly. Here are some tips to cut your los…
April 27, 2022
17 Worst Things to Buy at Dollar Stores (Dollar Tree Included)
spending

17 Worst Things to Buy at Dollar Stores (Dollar Tree Included)

These discount retailers stock plenty of bargains, but not all of the merchandise is worth the buck, especially since Dollar Tree’s price increase.
April 19, 2022