Advertisement
Healthy Living on a Budget

Smart Ways to Spend Down Your Flexible Spending Account

Some employers allow workers to carry over up to $500 in a flexible spending account from one year to the next, while others offer a grace period until mid March. Knowing your deadline will prevent you from losing FSA dollars.

Question: My employer changed our flexible spending account rules so we can now roll over $500 from one year to the next. Do I still have until March 15 to use the rest of the money, or do I have to use all but $500 by December 31, 2017? If so, what are some good ways to use the money before the end of the year?

Advertisement - Article continues below

Answer: If your employer offers a $500 carryover, you must use the rest of the money in the account by December 31, 2017, or you will lose it. The plans can’t offer both the $500 carryover and the March 15 grace period.

“Employers can only choose one (or neither) of these deadline extensions, so it’s vital that employees are sent regular reminders in advance of the plan-year deadline,” says Jeremy Miller, CEO and founder of FSAStore.com, which specializes in selling items that are FSA-eligible.

This is an important time of year to find out about your employer’s flexible spending account deadline. Many employers used to offer a grace period until March 15 to use the money in the account, but more of them every year are switching to permit the $500 carryover instead. A study by the Society of Human Resource Management found that 46% of employers offered the $500 carryover option in 2017; 32% offered the grace period.

Advertisement
Advertisement - Article continues below
Advertisement - Article continues below

If you still have more than $500 in your FSA and have a December 31 deadline, you can always use the money on co-payments, deductibles, prescriptions drugs and other out-of-pocket medical costs. This is also a good time to stock up on items you can use throughout the year, such as contact lenses, prescription sunglasses, a backup pair of glasses, contact lens solution, sunscreen with an SFP of 15 or higher, knee and back braces, heat and cold packs, and first-aid kits. You can use the money for many drugstore items without a prescription, such as thermometers or blood pressure monitors, including new smartphone-enabled versions, says Miller. See FSAStore’s list of FSA-eligible products and services for more information.

If you have a choice between a flexible spending account and a health savings account in the future, keep in mind that the HSA doesn’t have the use-it-or-lose-it rules of the FSA. HSA money may be used tax-free for eligible medical expenses anytime in the future. Also, you can have an HSA and an FSA if you have an eligible high-deductible health insurance policy and you have an “HSA-compatible FSA.” This HSA-compatible FSA, though, can only be used for dental and vision expenses until you reach your plan’s deductible. For more information, see Can I Contribute to Both an HSA and an FSA?

Advertisement

Most Popular

What Are the Income Tax Brackets for 2020 vs. 2019?
tax brackets

What Are the Income Tax Brackets for 2020 vs. 2019?

The IRS unveiled the 2020 tax brackets, and it's never too early to start planning to minimize your future tax bill.
June 20, 2020
HSAs Get Even Better
Financial Planning

HSAs Get Even Better

Workers have more options with flexible spending accounts, too.
July 2, 2020
17 States That Will Gain or Lose Electoral-College Votes After the 2020 Census
Politics

17 States That Will Gain or Lose Electoral-College Votes After the 2020 Census

Every 10 years, the 435 seats in the House of Representatives are reassigned based on the results of the U.S.
July 2, 2020

Recommended

Sales Tax Holidays in 2020
state tax

Sales Tax Holidays in 2020

Sixteen states are having sales tax holidays this year. If you plan your shopping around these tax-free periods, you can save big on back-to-school cl…
July 1, 2020
Resources for alternative forms of transportation needed by many older adults
retirement

Resources for alternative forms of transportation needed by many older adults

For many older adults, having an alternative mode of transportation may be the difference between independence and social isolation.
June 29, 2020
13 Luxury Goods That Are Cheaper at Costco
spending

13 Luxury Goods That Are Cheaper at Costco

You could be missing out on huge savings: Costco sells a limited selection of luxury goods at discounted prices, both in-store and online.
June 27, 2020
COVID-19: A Once-in-a-Lifetime Chance to Change Our Spending Habits
spending

COVID-19: A Once-in-a-Lifetime Chance to Change Our Spending Habits

The coronavirus pandemic has changed everything, including how we spend money. Are you spending less right now? Many people are. Here’s how to make th…
June 17, 2020