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.

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“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 (opens in new tab), 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 (opens in new tab).

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.

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.