Health Care Flexible Spending Accounts: Don’t Lose Your FSA Money

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Here’s my annual reminder (to myself, really) to get back all the money sent into Healthcare Flexible Spending Accounts (HC FSA) before it disappears forever. The maximum salary deduction limit is $2,700 for 2019. You can pick this during Open Enrollment season, but it can also be adjusted during “qualifying life events” like the birth of a child, marriage, or divorce.

Quick ideas. If you didn’t exhaust your funds with insurance copays or deductibles, here are eligible items that you can still buy over-the-counter without a prescription. Just order things online and then submit the receipt. Amazon even has a special FSA-eligible page that accept FSA/HSA debits, complete with an “under $25” and “little-known eligible items” section.

Certain over-the-counter (OTC) items such as cough medicines, pain relievers, acid controllers, and diaper rash ointment require a prescription for reimbursement. This is an added hassle, but worth a quick ask if you have a doctor appointment anyway.

When getting a receipt, make sure it clearly includes the following:

  • Date of service or purchase
  • Name or description of the item
  • Amount of purchase

Deadline extensions. Employers have the option of adding one of the following:

  • Some plans allow a grace period until March 15th of the following year as opposed to a December 31st deadline to use your funds, but it may only apply to claims and not late purchases. Check with your employer.
  • Some plans allow participants to carry over up to $500 in unused FSA funds into next year. Check with your employer.

Big, exhaustive lists. Some of these are searchable by keyword as well.

Finally, only your FSA administrator can provide you with the exact guidelines for reimbursement according to your plan. I learned this the hard way when our FSA administrator switched one year from in-house to Conexis (now since acquired by WageWorks). Wow, Conexis was a pain. I had to submit some claims three times before finally getting approved. If you count the time wasted, I probably lost money by participating in the FSA at all. The skeptic in me suspects that this bureaucratic nightmare is part of their business model. (Remember mail-in rebates?) Guess who gets to keep un-reimbursed FSA funds? The employer, which can then use the money to pay for… the FSA administrator.

p.s. If you have a Health Savings Account (HSA) and think you are ineligible for an FSA, look for a “limited-purpose FSA” option that is restricted to dental and vision care services. These have the same max annual salary deduction.

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Comments

  1. This advice just doesn’t seem as applicable as it was 10 years ago. The rise of HSA’s and FSA rollover funds offered by many employers has eliminated the need for this archaic practice of “burning” unused funds.

    The only reasons I think you would legitimately still need to consider this are:
    * You expect high medical needs and regularly contribute the maximum to your HSA. From everything I’ve researched, HSA funds are way more flexible than FSA funds, so you generally should not contribute to an FSA unless you’ve maxed out your HSA contributions for the year. Same logic applies to limited purpose FSA’s as well.
    * You have a PPO (not HSA) plan and don’t have rollover capability. In this case, you need to compare the amount of funds you’re “burning” to the tax benefit you’re gaining and plan appropriately.

    Otherwise, it just seems like poor planning/gambling. Take the tax benefit if you are reasonably certain you will need the funds (e.g. recurring prescriptions). Don’t risk losing more money than the tax benefit is worth.

    Unless I’m missing something in the logic here?

    • Last I checked, HDHPs are increasing in popularity (roughly 25% with HSA, 25% w/o HSA), but over 50% of insured are still on traditional health insurance. That means still eligible for traditional FSA. I’m still on traditional health insurance. So the same problem remains for all such folks, which is the estimation of FSA funds in October/November of the previous year when you don’t know how much you’ll actually spend in the next 12 months. If you are off on your estimate, you might as well stock up on some non-perishable healthcare items that you expect to use up eventually.

    • I am in a PPO plan that is HDHP. Therefore, I have HSAs. I also have a traditional FSA… about $700 currently needs to be spent by EOY. The article was useful to me.

  2. I’m a consultant and get a 1099 instead of a W-2. I’m the employer and employee. I have an HSA account and HDHP. Are you (Employer) required to have a cafeteria 125 documentation in order to have a HSA account? Is Wageworks act as the middle man providing the cafeteria 125 documentation in order to be compliance?

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