FSA use-or-lose deadline nears
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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.”
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.”
The same holds true if you’re having trouble hearing. Sometimes pride prevents individuals from admitting they need hearing aids, but often the costs of an examination and the hearing device can also be roadblocks. An FSA can help with the financial component, including the purchase of extra hearing aid batteries.
Replenish medicine cabinets
It’s no secret you can use FSA money to compensate for any prescription co-payments. You’ve likely been turning those into your account manager throughout the year.
If you need to refill some prescriptions now, LeValley Cocovinis suggests buying in bulk. But FSA money also can be used for many over-the-counter medications.
Pick up extra headache medications, as well as cold remedies to combat those sniffles that always seem to show up this time of year. “You want to look at the expiration date, but there’s no reason not to go to the local drugstore now and buy everything you use,” says LeValley Cocovinis.
Consider replenishing or purchasing a first-aid kit. “Get yourself a really good first-aid kit,” says LeValley Cocovinis. “Since it will qualify as a medical expenditure, get the big one, the $50 one. The Mylar blanket, ice pack and all the items can really come in handy.”
Other often-overlooked FSA items LeValley Cocovinis says you might want to pick up while you’re at the drugstore include OTC contraceptives and Rogaine. Medical equipment such as blood-pressure monitors, thermometers, and neck, wrist or other joint braces also qualify for FSA reimbursement, as do dietary supplements, including vitamins, minerals, and herbal and botanical items — as long as you use them to treat a current illness, not simply to augment your general health.
If you’re unsure about exactly which OTC items your FSA will cover, ask your benefits manager or plan administrator. Many grocery and drugstores also help out customers with cash register receipts that note FSA-eligible purchases.
Drugstore.com, the online version of your local pharmacy, also has a special “FSA store” featuring OTC products most commonly reimbursed from the accounts. Even if you don’t want to buy from the site, it’s a good place to browse for ideas on how to zero out your FSA.
Read last year’s story on using FSA money so you don’t lose it.