Flexible Spending Account Ideas: Use It Or Lose It!

Like many of you, we have a Flexible Spending Account (FSA) that allows us to pay qualified healthcare expenses using tax-free money. (Did you know that FSA money is also exempt from payroll taxes in addition to income taxes?) I still think the idea of guessing your future healthcare expenses in a use-it-or-lose-it system is illogical at best, but it is what it is. (In 2012, there was talk from the IRS that this policy might be changed.) We recently even got one of those FSA debit cards so at least we don’t have to deal with faxing in receipts when purchasing from approved merchants.

If you didn’t exhaust your funds with insurance copays or deductibles, here’s a quick guide to using up all that cash. First, I should say that some plans allow a grace period until March 15th of the following year as opposed to a December 31st deadline to use your 2012 funds, so confirm with your FSA administrator.

The go-to product used to be buying over-the-counter drugs like cough medicine or painkillers. Effective January 1, 2011, the cost of over-the-counter medications became no longer eligible unless the medication was prescribed by a doctor. Keep this in mind and ask for a prescription for any OTC drugs you buy on a regular basis. Don’t forget, Target and Walmart now offer 30-day supplies for $4 and 90-day supplies for $10 on many generic drugs that are also packaged under over-the-counter labels.

FSA Items Still Available Over-The-Counter Without A Prescription

  • Eye care (contact lenses, solution, drops)
  • First aid supplies (bandages, gauze, tape) for emergency kits
  • Family planning products (birth control, pregnancy tests)
  • Home testing aids (blood pressure, diabetes, thermometers)

As a reference, I usually check the well-organized lists from health insurers like Aetna or third-party FSA administrators like Conexis. In addition, just about every online drugstore (Drugstore.com, CVS, Walgreens) now has a special FSA-eligible section, but some still include items which now require a prescription under the the new regulations (look for FSA vs. FSARx).

Comments

  1. I was denied for high SPF sunblock this year, which was always eligible pre-2011. It’s on Aetna’s list, but I guess our FSA administrator is more strict.

  2. Don’t forget mileage reimbursement! I use my fsa to reimburse any travel costs to and from the doctors. The current rate I believe is 23.5 cents per mile.

  3. I’ve bought Claritan-D twice in 2011 and noticed both times the CVS receipt marked the amount of that product separately from my total as “FSA Eligible.”

    I would normally consider this product not eligible under the changed rule in 2011, and I’ve already used my FSA allowance so I can ‘t submit these receipts now to test it out. But I am curious – has anybody seen anything listed anywhere that would qualify Claritan-D as FSA-Eligible when cough medicines, etc, are no longer eligible? Or is this receipt notation likely a vestige from 2010 and before that CVS probably forgot to update in 2011?

  4. The IRS-mandated optional grace period that some FSAs allow is only for expenses incurred through March 15th of the following year.

    Other expenses that are eligible for reimbursement that are often overlooked are condoms, mileage reimbursement for all of your medical appointments (at 19 or 23.5 cents per mile, depending on date of service), Breathe-Right strips, Reading Glasses, Purell, Diaper rash Cream, Insole supports for shoes, Lactaid, and lots more.

    Claritin-D is eligible, but you have to submit the prescription along with the receipt, even though it’s OTC.

    Sunscreen has to have SPF of 30 or higher, according to my FSA page, which has an excellent list of eligible expenses:

    https://www.fsafeds.com/fsafeds/eligibleexpenses.asp

  5. i also bought a humidifier and hot/cold packs from Rite-Aid with my FSA card – got back $20 rite-aid rewards to spend on next purchase due to the promos.

  6. So I’ve been on a spending spree with my FSA card, I checked the balance and it’s -550.00, first off I don’t know why transactions went through if I had nothing left, am I on the hook for this money !!!!!!!??????????

  7. Not the most above the board way of doing things, but you can “buy” a home blood pressure cuff or an expensive breast milk pump on Amazon (both eligible). Get the order confirmation to submit to your FSA administrator for reimbursement and then cancel the order.

  8. I like the way you think Fiana, but what of overdraft, what of I ask you???

  9. @Fiana: That’s cheating and tax fraud.

    @Nicky: FSA card can become a pain if you use it above it’s limit or use it for non-FSA-Eligible items. The FSA admins will be harrassing you for these soon. Goodluck!

    @Jonathan: Totally agree with you about the stupidity of ‘use it or loose it’. Why not just re-imburse uptill the limit?

  10. Jonathan,

    I couldn’t agree more. I’ve always had a problem with the fact that employees are supposed to pre-determine the amount they are going to spend on healthcare for that year, and if they fall under the amount they’ve claimed, they lose the dollars they haven’t spent. Health savings accounts have been a good solution to that part of the problem, but there are still FSA’s out there.

    It’s too bad that over the counter drugs were excluded from both FSA’s and HSA’s recently. That was a nice benefit of having one of those types of accounts. Great blog post!

    Jared Balis

  11. Fiana – You say “Not the most above the board way of doing things, but you can “buy” a home blood pressure cuff or an expensive breast milk pump on Amazon (both eligible). Get the order confirmation to submit to your FSA administrator for reimbursement and then cancel the order.”

    That is a felony and could mean jail time for you. I would think twice about doing that!

  12. James, you know what’s a felony? Denying OTC reimbursement request for prenatal pills and requiring Rx for it. Or requiring Rx for baby bottles and nipples. For that Aetna should go to jail.

  13. For people looking for another option, I created an organization to connect unused FSA funds to the medical supplies that free clinics need most.
    Check it out at http://www.flexaid,org!

  14. “James, you know what’s a felony? Denying OTC reimbursement request for prenatal pills and requiring Rx for it.”

    Actually, no it’s not.

  15. I detest this system and do not use it. It is utterly ridiculous that one would be able to predict expenses for health care, especially if you have a large family. Generally, the more you need help in the form of tax relief and tax savings, the less able you will be to correctly use this system. For example, a struggling large family might have uneven income and hard to predict medical expenses, especially if they use the more affordable types of insurance.

    My employer once started a program mid-year and told us about it in June. I was so keen to do this for a certain medical procedure that I signed up right away and calculated to put in the correct amount for this known and fixed cost. I got the procedure done in June but then procrastinated and didn’t ask for reimbursement until December. At that time, I was told I could not get reimbursed because I had the procedure done before the plan started (July 1). This would have been a loss to me of a couple grand.

    so, there’s another gotcha in rare cases.

    I complained to my employer and they gave the money back to me. They told me the un-spent money actually comes back to them in the end and I suppose this helps to cover their costs of implementing the payroll deductions.

  16. Last June my health FSA ran out and I had like $550 on it that i never spent. went to costoco and purchased about 10 blood pressure monitors totaling $550. I then put the receipt in to fsa and returned the monitors. A bit sneaky but did not want to loose it.

  17. Can doctor visit copays incurred in January 2013 be applies toward 2012 FSA?

  18. @NJB – Some plans allow a grace period, you’d have to check with your specific administrator.

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