If you have money sloshing around in a Flexible Spending Account, you may be feeling some pressure to spend it by December 31.
An FSA is a pre-tax fund for healthcare expenses, similar to a Health Savings Account. Industry estimates suggest more than 70 million Americans have one or the other.
“They’re both ways for people to stretch their healthcare spending a little further,” said Jake Spiegel, a research associate at the Employee Benefit Research Institute (EBRI), a nonprofit research firm.
But there is a key difference. HSA money carries over from one year to the next. Most FSA funds do not.
HSAs are paired with health insurance plans and belong to the covered individual, Spiegel said. FSAs, by contrast, are “accounts that don’t really exist on paper until the money actually needs to be spent,” he said. “They are technically owned by the employer.”
At year’s end, unused FSA money “technically goes back to the employer,” Spiegel said.
Some FSA plans include a grace period of up to 2 ½ months, allowing the employee to spend the money in the next year. And some plans allow a portion of unused funds to roll over into the next year. This year, the maximum carryover is $610, or one-fifth of the annual contribution limit, $3,050. (Next year, the FSA contribution limit rises to $3,200.)
But many employees leave FSA dollars on the proverbial exam table. In a 2019 analysis of its own FSA database, EBRI found that 48% of accounts had money remaining at year’s end and that the average amount forfeited was about $370.
But here’s the good news: Even if you leave FSA funds unspent, you can still save money in the end. Because they are pretax dollars, FSA funds boost the employee’s spending power by the amount of tax they don’t pay. At a 25% tax rate, putting $2,000 into an FSA would yield $500 in savings.
“You could have a few hundred dollars left at the end of the year and still come out ahead,” Spiegel said.
If you need to spend FSA money now, America’s retailers are here to help.
Amazon has an FSA store. So does Walmart. There is even an actual FSA Store, an online clearinghouse for all things FSA-eligible.
“We have everything from your over-the-counter medicine to menstrual care products to high-end skin products to treat acne,” said Rachel Rouleau, chief compliance officer at FSA Store. “There are literally thousands of ways you can spend your FSA dollars.”
We, too, are happy to help you spend your FSA dollars. Here are 10 ideas.
Covid tests. Yes, they are eligible, and lots of us are buying them right now.
Contact lenses. They are FSA-eligible. And if you wear them, you probably need more.
Pain relievers. It’s cold and flu season: this feels like a no-brainer.
Unpaid medical bills. Check that stack of bills. You may have some lingering copays from long-forgotten doctor visits.
Dentistry. You may or may not actually need to go to the dentist every six months, but if it’s been a year or more, then now may be the time.
Yoga. Fitness classes and apps may be FSA-eligible with a doctor’s authorization, according to Truemed, a company that partners with providers.
Air purifiers. Air purifiers are not, strictly speaking, FSA eligible, but they may be covered to treat a legitimate medical condition.
Ancestry kits. According to 23andMe, you should be able to use FSA funds to cover some or all of the costs of genetic testing. Find that cousin you didn’t know you had!
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An Oura Ring. These bands are said to track “over 20 biometric signals,” from temperature to heart rate to sleep quality, all from your finger.
A massage gun. According to FSA Store, a state-of-the-art Aura Revive Heated Massage Gun is “the tool you need and the pain reliever you deserve.”
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