Use It or Lose It: Draining Your FSAs Before January
One in three workers is about to give income back to their employer at the end of the year. That is because some 33 percent of employees are holding balances in use-it-or-lose-it flexible spending accounts (FSA) for healthcare, according to WageWorks, a company that administers benefits programs.
An FSA allows employees to set aside pretax dollars to pay for out-of-pocket medical expenses; most commonly they are used for doctor visit co-pays or prescription drugs. "It's a really a way to maximize your take-home pay, give yourself a raise," said Jody Dietel, chief compliance officer at WageWorks.
But if you do not use the full amount by the end of the year, the leftover balance usually reverts to your employer, said Barry Schilmeister, a partner at human-resources consulting firm Mercer. (Some employers extend that date to March 15 of the following year.) Most employers apply those leftover funds to benefit administrative costs, saving themselves money but not benefitting their employees.
In 2013, FSAs under U.S. health reform will for the first time be capped at $2,500; previously, employers set their own limits that averaged twice that, according to Total Administrative Services Inc (TASC), a benefits administrator.
The U.S. Treasury Department last summer also asked for comment on allowing FSAs to carry over from one year to the next. "We're very hopeful that the use-it-or-lose-it requirement will go away," said Natasha Rankin, executive director of the industry group Employers Council on Flexible Compensation (ECFC).
Only about 28 percent of employees use FSAs. Rankin believes they would be more popular if workers could carry them over. In contrast, healthcare savings accounts paired with high deductible insurance plans are governed by a different set of rules. Employees own those accounts directly and can accumulate funds in them indefinitely.
For workers with traditional FSAs, December is usually the time to drain the account. There are creative ways to do that. Here are ten ways to find qualifying expenses you may not have considered.
Review what you have spent already Often, a look at your records will yield medical expenses you have incurred over the year but have not yet withdrawn from your FSA. Check with your insurer for a list of all your office visits in 2012 for unreimbursed co-pays, and your local pharmacy can give you a list of prescriptions filled. Then reimburse yourself out of your account.
Head to the drugstore Although over-the-counter medications are only eligible with a prescription, ECFC counts more than 32,000 over-the-counter items that do not require prescriptions and can be paid for with FSA money, including first-aid basics such as Band-Aids. A complete list is regularly updated by the information clearinghouse Special Interest Group for IIAS Standards and can be found on its website ( link.reuters.com/kyg54t ).
Pay for parking If you drive to medical appointments, out-of-pocket expenses, such as parking or tolls, qualify. You can also claim 19 cents per mile driven as well as costs for meals or lodging during a hospital stay. Don't forget receipts for ambulance service, bus, taxi and airline fares related to medical visits as well.
Kick a bad habit Pay for smoking cessation, alcohol or drug treatment, or medically needed weight loss programs. Or have your cholesterol checked. Your employer might help, offering cash bonuses or insurance discounts to workers who do the right thing.
Make appointments Have you been putting off a dental cleaning? An eye exam? Schedule and pay for them now. Even if your insurance covers preventive care, your FSA can pay for necessary follow-up. Plus, stock up on glasses, contact lenses, even contact solution — all qualifying expenses.
Schedule and pay for "discretionary" surgeries If you have a large balance, Schilmeister suggests trying to arrange to have any elective surgeries done that you have been putting off, such as wart, corn or polyp removal.
Get adjusted Although rarely covered by insurance, trips to the chiropractor, acupuncturist, even osteopath can be paid for with FSA money. Also often overlooked is foot health, Rankin said, which is linked to conditions such as diabetes or arthritis.
Get pregnant, or not For parents-to-be, FSA funds will pay for fertility treatments, pregnancy test kits, even Viagra. Prep for baby by using your FSA to buy a breast pump. Adoptive parents can also have any medical expenses associated with the adoption reimbursed. On the other hand, sterilization treatments such as a vasectomy as well as birth control also qualify.
Think ahead Considering LASIK surgery next year? Kids need braces? See if you can get started in the last weeks of December instead. "Orthodontists may let you pay for the full treatment upfront," said Paul Fronstein of the Washington, DC-based Employee Benefits Research Institute. "Or spread it out across several years if that's better."
Don't stress An average of $120 is left in FSAs, Dietel notes, with most people forfeiting less than $100. "You've already saved up to 40 percent in taxes," she said. "So, even with a small balance, you're probably still ahead money-wise."
If you are still feeling anxious about that, ask your doctor to prescribe a massage. Then you can use the rest of your FSA to pay for it.