Empty Your Flexible Spending Account

If you're thinking of cleaning out your 2011 flexible spending account to avoid the "use it or lose it" rule, remember that starting this year, you can't use flex funds to pay for over-the-counter medicines, such as aspirin, ibuprofen or allergy meds, without a prescription (except for insulin).

But that restriction does not apply to other, nonprescription medical items, such as crutches, contact-lens solution or bandages. (For a list of what is allowed by law, see IRS Publication 502.) The same rules on eligible purchases apply to health savings accounts.

In most cases, you have until March 15, 2012, to use your 2010 funds, but some employers still adhere to the December 31 deadline for using the money or forfeiting the balance. Check with your employer to verify your plan's deadline.

If you're about to sign up for a flex account for 2012, keep in mind that it will be the last year before a congressionally mandated $2,500 limit goes into effect in 2013. (Currently, there is no statutory limit, but many employers allow set-asides above $2,500.)

Consider signing on for a larger-than-usual spending amount for 2012 with the intention of accelerating some elective medical procedures, such as laser eye surgery, while you can still pay for such big-ticket expenses with pre-tax dollars.

You can find out how much money it makes sense to put aside for 2012 with our Flex Plan Calculator.