Spending Your FSA Funds

Now is an ideal time to take stock of your flexible spending account (FSA) by checking your balance and the deadline for spending it.

For most people, this annual deadline is Dec. 31, at which point most or all of your unspent money is lost. With this year more than half over, you should be able to calculate your average spending rate and see if you are likely to have leftover funds when the end of the year arrives.

If you do need to step up your spending, you have to do it strategically. The goal isn’t to splurge on unnecessary expenses, but rather to ensure that you don’t overlook an eligible expense and pay for it out of pocket. Furthermore, you can maximize your savings by converting some non-eligible expenses to FSA-eligible ones.

Now is an ideal time to take stock of your flexible spending account (FSA) by checking your balance and the deadline for spending it.Now is an ideal time to take stock of your flexible spending account (FSA) by checking your balance and the deadline for spending it.The first step to strategic spending is to check the exact policy of your plan. Depending on your balance and your plan specifics, you may find that you don’t have to worry about losing funds at all.

“Some employers allow you to carry up to $500 into the next year or offer a grace period of up to two and a half months after the end of the plan year,” states Suba Iyer in an article on GetRichSlowly.com. “They can [offer either] a carryover or a grace period, but not both.”

According to the IRS, only prescription medication qualifies for FSA purposes. (The one exception to this is insulin.) You may be able to stock up on your prescriptions now, while you still have FSA funds, by ordering a multi-month supply through the mail. Your doctor may have to write a new prescription to allow this, so make plans to discuss it at your next appointment.

If you spend a lot on nonprescription medications, you may be able to obtain prescriptions for them instead of buying them over the counter. Many people are surprised by how many common medications are available with a prescription, so bring your entire list of medications to your doctor (which you should already be doing) to cross-reference them and see where you could save. In addition to medications, there may even be some surprising items that you can get a prescription for.

“[I]f your baby is on a special diet formula, talk to your doctor and get a prescription for that particular formula,” states Iyer. “It will be eligible as a medical expense (regular formula doesn’t come under this).”

In addition to medications, one of the most common uses for FSA money is to cover copays and exam expenses not covered by insurance. You may even be able to use FSA funds for exam-related transportation costs.

“Allowable transportation costs include not only mileage or actual car expenses for travel primarily for and essential to medical care (you must use one travel reimbursement calculation method), but also bus, taxi, train or plane fare, or ambulance service and parking fees and tolls,” states Kay Bell, a contributor to Bankrate.com. “Just be sure you don’t also count your travel costs as itemized medical deductions on Schedule A.”

Now that summer is in full swing, you may be interested in making a vision appointment. If you wear glasses, it is the perfect opportunity to get a pair of prescription sunglasses or to switch to contact lenses so that you can use regular sunglasses over them. If you are spending more time outdoors, you may have noticed that the surface of your glasses has become scratched, which can cause distracting distortions and glare in the sunny weather. Getting a new pair of glasses, potentially with upgraded glare and UV protection, is an ideal way to ensure you use up your FSA.

Summer is also a great time to update your home and car first-aid kits, which can be especially wise for families with children who are out of school and immersing themselves in outdoor activities. Basic first-aid kits are FSA-eligible, as are many types of braces (like neck and joint), blood pressure monitors and thermometers. The American Red Cross has a list of supplies for a basic family first-aid kit at http://www.redcross.org/prepare/location/home-family/get-kit/anatomy.

Make sure to look through your receipts when you buy items related to health care, because many stores mark items that are FSA-eligible right on the receipt. You can also talk to your benefits manager to ensure you don’t miss any eligible expenses. It is important to note that FSA funds can’t be used to pay for health insurance premiums, for long-term care coverage or expenses, or for things covered by another health plan.

An FSA can be a great tool for cutting your health care spending, but using it correctly takes a little organization and planning ahead. So keep these tips in mind to maximize your savings, and be sure to talk to your financial institution or financial adviser if you have any questions.


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