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

2 Credit Card Gotchas to Watch Out For
credit cards

2 Credit Card Gotchas to Watch Out For

After an infuriating wake-up call with her own credit card company, one financial services consultant wants consumers to know something: It’s smart to…
October 20, 2020
Election 2020: Joe Biden's Tax Plans
taxes

Election 2020: Joe Biden's Tax Plans

With the economy in trouble, tax policy takes on added importance in the 2020 presidential election. So, let's take a look at what Joe Biden has said …
October 15, 2020
When Retirees Question More Retirement Income
annuities

When Retirees Question More Retirement Income

What would you say if I told you that you could safely get significantly more retirement income from your retirement savings? That’s what I call an In…
October 20, 2020

Recommended

The Ultimate Guide to Amazon Prime Day 2020: When It Starts, the Best and Worst Deals, Competing Events, More
spending

The Ultimate Guide to Amazon Prime Day 2020: When It Starts, the Best and Worst Deals, Competing Events, More

In a first, the giant retailer has pushed Amazon Prime Day this year from July to October, effectively launching the holiday shopping season weeks ear…
October 8, 2020
Retirees' Guide to Giving for the Greatest Impact
Making Your Money Last

Retirees' Guide to Giving for the Greatest Impact

The need for charity is climbing, particularly to combat the rising poverty, hunger and homelessness from the pandemic’s economic fallout. Here's how …
October 7, 2020
11 Costly Medicare Mistakes You Should Avoid Making
Medicare

11 Costly Medicare Mistakes You Should Avoid Making

If you don't make the right choices to fill in the health coverage gaps, you could end up with high Medicare premiums and big out-of-pocket costs.
October 1, 2020
Your Guide to Open Enrollment
health insurance

Your Guide to Open Enrollment

Your options may look a little different this fall. Meanwhile, the cost of coverage continues to climb.
October 1, 2020