Did you know… A high number of FSA accounts (almost 50%) lose money each year by not spending it! These aren’t small amounts, accounts that forfeit money are giving up over $400 on average each year. That’s real money.
Here are some helpful things to know that may help you keep track of your available funds…
Who sets the rules for my FSA?
Because FSA monies are tax-free, the IRS sets rules on these funds such as what types of items can be expensed and how much can be input each year. Each year the FSA maximum contribution typically increases, for 2024 the maximum increased $150 to $3,200. Benefit plans conform to the IRS regulations but may have additional policies.
FSA monies expire at the end of the plan year, meaning any money remaining in the account is lost.
What can I use my FSA for?
You can use an FSA to pay for qualifying medical expenses (QME) such health care services, co-payments and deductibles as well as prescription drugs, medical equipment and supplies. Many more things than people realize! For example, you can buy aspirin with FSA funds and also exercise equipment (when accompanied by a letter of medical necessity).
Do I have to wait to accumulate funds in my FSA account before spending my contributions?
No. Each new plan year you select how much to contribute to your FSA and this amount is taken out, tax-free, each paycheck. However, what many people don’t realize is the entire FSA contribution is available to you up-front, i.e., at any time in the plan year (minus your reimbursements) regardless of how much you’ve put in to-date.
Example: Your plan year starts in January. You allocate $1,200 for the year, meaning you’ll contribute $100 a month to the FSA. By end-February you’ll have contributed $200 to your FSA. Regardless of the month, and assuming you’ve had no reimbursements, you have the full $1,200 available to you to spend.
What if I haven’t spent all of my FSA funds by end of year?
First, determine if you have any qualifying medical expenses (including equipment and supplies, remember things like aspirin can count) you haven’t submitted. You can submit any receipts in the plan year for qualifying medical expenses for reimbursement. Next, if you still find yourself with funds remaining check if your employer offers a grace period, which can be up to 2.5 months, or a carryover/rollover option which, in 2024, allows you to carry over up to $610 to the next plan year.