FSA use-or-lose deadline nears

  • Many workers annually forfeit sometimes sizable amounts of FSA money.
  • There's still time to make sure your 2009 medical FSA money isn't wasted.
  • FSA money can be used for many over-the-counter medications.

Most December shopping lists are filled with holiday gift ideas. But if you have a flexible medical spending account, commonly referred to as an FSA, 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? If 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 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 and, for now, many over-the-counter, or OTC, drug purchases. Changes to the OTC portion of FSAs are being discussed as part of health care reform legislation, so this might be the last year to take full advantage of this benefit.

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.

Use it or lose it

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 2009 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 tax attorney Donna LeValley Cocovinis. "If you can't get the whitening, the cleaning never hurts."

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