Use FSA money so you don't lose it

Most December shopping lists are filled with holiday gift ideas. But if you have a flexible medical spending account, it's time to make another list, this time of items you can buy with the workplace benefit funds.

The reason for the second list? f you don't use your medical spending account money by Dec. 31, you'll likely lose any cash left in the account.

Flexible spending accounts, commonly referred to as FSAs, are popular employer-provided benefits, allowing workers to set aside money to pay for items such as health insurance co-pays, uninsured treatments (such as vision care) or even over-the-counter drug purchases. The money is put into the employee account through regular, equal payroll deductions. Even better, the deductions are made on a pretax basis, meaning you don't have to pay federal, Social Security -- and in some cases -- state taxes on that amount of income.

However, FSAs do have one major shortcoming: If you don't use the money, generally at the end of your benefit year, you lose it. Because of this no-carryover rule, many workers annually forfeit sometimes sizable amounts of FSA money.

Complaints about this restriction prompted the Internal Revenue Service a few years ago to change the rules. Now, says the IRS, spending plan participants can make claims against their accounts for up to two and a half months after the end of their benefit year. If you're on a calendar benefit year that ended Dec. 31, you can use your 2008 contributions for expenses incurred as late as March 15.

The hang-up here is that it's up to employers to implement the extended-access option. The IRS said they could offer the extra FSA time, not that they had to offer it. If your employer doesn't provide you the extra time, then you must spend up your account by the end of the benefit year, which in most cases is Dec. 31.

But don't panic. There's still time to make sure your 2008 medical FSA money isn't wasted. Here are some ways to empty your account.

See your doctor and dentist now

One of the most common uses of FSA money is paying for orthodontia. Although time is tight, it's worth a try to get into your dentist's office now.

On the other end of the age spectrum, older patients who have dentures can take advantage of the account money to ensure that their dental health is good. Patients of any age should squeeze in another appointment in the next few days, especially if it's been a while since your last visit to the dentist.

And while cosmetic procedures such as teeth whitening are not allowed, you still can get a bit of a smile boost courtesy of your FSA funds. "One thing you can spend the money on is getting another teeth cleaning," says Donna LeValley-Cocovinis, attorney and contributing editor of J.K. Lasser's annual income tax guide. "If you can't get the whitening, the cleaning never hurts."

Don't forget about your routine annual physical exam. If your insurance doesn't pay or only covers a limited amount for preventative care, using your FSA to cover it is a good financial and health care move. This could include skin-cancer screenings and cholesterol checks. "Go for a checkup, spend out your account and then know you're OK," says LeValley-Cocovinis.

FSA cash also is great for paying for alternative treatments that are generally not covered by health plans, such as acupuncture or chiropractic therapy.


Vision care is another area, says LeValley-Cocovinis, where employer health care plans offer little or no coverage. Your FSA money can be used to pay for eye exams, a new or extra pairs of glasses, even LASIK eye surgery.

"Prescription glasses, especially sunglasses, are expensive, but having an extra pair is useful," says LeValley-Cocovinis. "And don't forget about extra contact lenses, especially the disposable ones."

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