Finance Expert Urges Workers to use their FSA Balance Before it Expires
A finance expert warns workers against putting off spending their remaining FSA dollars until the last minute, as plans expire at the end of the year
Many Americans have just over two months left to use up their FSA balance before they forfeit their funds - which can mean up to $3,050 is lost
Helpful ways to use up the residual sum include partaking in smoking cessation programs to get ahead of your New Year’s resolutions
You may want to stock up on medication before next year, as the average yearly prescription spend can be as high as $1,432 per person
Michael Dinich, personal finance expert and founder of Wealth of Geeks, has urged workers to prioritize using their remaining FSA balance sooner rather than later. A Flexible Spending Account (FSA) is an employer-sponsored benefit that allows employees to set aside a portion of their pre-tax earnings - up to $3,050 annually in 2023 - to pay for qualifying out-of-pocket healthcare and care expenses.
For many workers, the date to use up their remaining balance is fast approaching, as most FSA plans expire at the end of the year - remaining any unused funds will be forfeited. This is because, as with other employment benefits, an FSA is subject to a ‘use-it-or-lose-it’ rule.
According to the latest figures from the Employee Benefit Research Institute (EBRI), more than two-fifths (40%) of workers forfeited at least part of their FSA contributions in the last few years, with the average person losing between $339 and $408 annually.
And while some services aren’t eligible to be covered by FSA funds, as decided by the IRS, many people may miss out on helpful products if they fail to buy them before December 31.
Michael says: “As we near the date at which your FSA balance is reset, it’s vital to start considering how you can use up your remaining funds to benefit fully from the tax-advantaged work benefit - especially if you’ve been putting off making a purchase.
“While it can be tempting to avoid burning through your balance prematurely, it’s important to consider the turnaround time for procuring prescriptions and having your claims reimbursed, as well as delays with getting a note from a medical professional to verify relevant products.
“But an FSA doesn’t just cover traditional healthcare expenses like medical appointments, over-the-counter medications, and copayments - it also covers a range of wellbeing-based services, products, and experiences that you may want to invest in before your plan expires.”
Some of the lesser-known products covered by a Flexible Spending Account include:
Smoking cessation programs. Whether you’re considering quitting smoking for your next New Year’s resolution or didn’t quite manage to meet your goals over the last year, costs for the programs and medications required to quit or reduce smoking are FSA-eligible if prescribed by a healthcare professional.
Acupuncture. When prescribed by a qualified healthcare provider, many acupuncture treatments are covered by an FSA, and expenses related to chiropractic care. This is particularly beneficial for office workers who find their posture needs improvement after staying seated for large periods of time.
Genetic testing. If you want to discover whether or suspect you have a genetic condition, testing and screening related to diagnosing a medical condition is eligible for reimbursement when prescribed. It may be worth pursuing this if you have a history of family illness or if you want to rule some things out.
Menstrual products. All menstrual products - including cups, pads, and period underwear - are considered medical expenses under the CAREs Act, meaning an FSA covers them. It could be worthwhile if you’ve been thinking about swapping your disposable products for a reusable cup or underwear.
Sleep trackers. A tracker device like a sleep tracker, heart rate monitor, or fitness tracker (such as a Fitbit) is eligible for reimbursement if you acquire a Letter of Medical Necessity (LMN) from a healthcare professional. Pursuing a product like this may be a good idea if you’re concerned about your routine.
Skincare products. An FSA covers some skincare products and services, including a dermatology visit, acne treatments, skin condition remedies, and SPF 15 and above sunscreen. Humidifiers are also eligible if you have an LMN, and you can also pay for scar treatment resulting from an illness or injury under some plans.
Fertility tests. Fertility monitors and reproductive health products, including over-the-counter at-home tests, are eligible for reimbursement. Some pregnancy tests are also covered depending on your plan, so it may be worth stocking up on both if you’re trying to start a family now or in the new year.
Glasses and contact lenses. When designed to correct vision, prescription visual expenses are covered under an FSA, including glasses, sunglasses, and contact lenses. Glasses are prone to breaking or getting lost, so using your funds to purchase a spare pair may be wise.
Finally, Americans may want to stock up on their prescriptions before the deadline hits, as the Agency for Healthcare Research and Quality found that the annual prescription spend was as high as $1,142 per capita in 2021 - with 22% of expenses paid out of pocket.
But before rushing to burn through your remaining balance, Wealth of Geeks’ Michael Dinich reminds workers to check the small print of their plan to ensure their purchases are eligible.
He says: “It’s important to double-check what your plan covers before spending your residual allowance, otherwise, you may be caught short before Christmas. Review the guidelines provided by your administrator to determine what is covered and consult your provider’s website or enrollment documents for clarification.”
About Michael Dinch: Michael Dinch has worked in personal finance for over 20 years, helping families reduce taxes, increase their income, and save for retirement. Before starting Wealth of Geeks, he worked as an advisor in the financial service industry, helping retirees and soon-to-be retirees with retirement income planning.