Asked and Answered: What happens to lost FSA money?

Around our offices, we say "use it or lose it" a lot each day. Whether we're reminding FSA holders of upcoming deadlines, or just sharing some information about these tax-free accounts, "use it or lose it" has become a tagline for our entire team. And, because we offer a growing selection of 4,000+ FSA-eligible products, our guests usually don't have any trouble using their FSA funds.

Since we're jumping into open enrollment season, we thought it would be a good idea to discuss the most common of questions when it comes to FSA funds -- what happens to the money that does get lost? No one likes losing money, no matter the amount. So we thought it was a good idea to remind people of what happens if they end up on the wrong side of the "use it or lose it" rule.

Let's cut to the chase…

You may not like this answer, but your unused FSA money returns to your employer. These funds can be used in a variety of ways, which we'll get to in a bit. Now, before you and your coworkers march down the hall with flaming torches, realize they're not the "bad guys" in this scenario. In fact, they're on your side, and are even taking some risks to make FSAs available to employees.

See it from your company's perspective

It's true -- your employer assumes a good amount of financial risk when you sign up for an FSA. That's because even though you get to contribute to your account little by little, through regular paycheck deductions, you actually have access to the entire year's allocation, right from the beginning of the plan year.

Who's fronting that money? You guessed it, the employers. And they're on the hook for any losses if you leave the company before making a full year's contribution.

In other words, if your plan year begins on January 1, and you opt for an expensive FSA-eligible procedure that week, you can use the entire year's allocation to pay for it tax-free. But if you quit a month later, your company is forced to eat that balance.

So, lost FSA funds from other employees can be used to offset these losses. It's not what your employers want to do. But it's certainly better for them than having to absorb the entire loss.

So where does it go from there?

While we certainly can't fault companies for wanting to protect themselves from potential financial losses, some choose to reinvest this "found" money into its people. No, they can't just refund you the exact amount you lost. But there are several ways they can share the wealth and ease the sting of lost funds.

1. Pooling

Though it's rare, companies could choose to give the money back to its employees directly. It's not as simple as refunding the exact amount lost to each person with an FSA, but employers might opt to pool the collective losses and distribute back to plan participants in a fair, uniform way.

(To be clear, any money returned to participants must be distributed to ALL participants -- not just those who lost funds that year.)

2. Administrative fees

Companies may choose to save these excess funds and use them as a way to offset the costs and fees involved in providing FSAs. By doing so, they can make it easier to offer these accounts to employees.

In this "worst case" scenario, your money ends up used in a way we outlined above. There is good news though -- your employer may offer a few options to help extend your funds and avoid losing them altogether.

1. Grace period

Many employers offer an FSA grace period -- something we've discussed quite a bit in our Learning Centers -- which gives you an extra 2.5 months to use their funds from the previous plan year. For example, if your plan year ends on December 31, you have until March 15 of the following year to use those funds before risking a loss.

2. Rollover

Another common FSA feature is the rollover option, which allows you to carry up to $500 of your FSA dollars to the following year, eliminating any last-minute rushes or lost funds.

Like we said at the beginning of the article, no one likes losing money, which is why we encourage users to create a budget and spend accordingly to meet your family's healthcare needs. But on the off chance you miss your FSA deadline, know that the money is safe, and might even find its way back to you before long.

From FSA basics to the most specific account details, in our weekly Asked and Answered column, our team gets to the bottom of your most-pressing flex spending questions. It appears every Wednesday, exclusively on the Learning Center. And for the latest info about your health and financial wellness, be sure to follow us on Facebook, Instagram and Twitter.


Flex-Ed: Shedding light on the Letter of Medical Necessity (LMN)

If you've spent some time looking through our Eligibility List, you probably noticed a classification of qualifying medical products and services as "requiring a Letter of Medical Necessity (LMN)."

In short, an LMN is like a doctor's note. Having an LMN can help any product or service that falls outside the IRS's definition of "medical care" (but can assist the treatment of a condition) get approved for FSA reimbursement.

Let's understand the term "medical care"

For a product or service to be FSA-eligible, it must treat, cure, diagnose or prevent a disease or illness. Or it has to affect a function of the body. So a product like a first-aid kit is a no-brainer, as it can be used in a huge variety of medical situations.

However, there are many treatment methods and products available that fall outside IRS guidelines that could be made eligible with some additional documentation from your doctor.

Here's an example: If your doctor suggests massage therapy to treat an injury, it's not FSA-eligible on its own. However, if you get an LMN from your doctor that outlines how the treatment method is essential to your recovery, your benefits administrator may accept it as an FSA-eligible expense.

How to submit an LMN

If you and your doctor have identified a medical product or service that can aid the treatment of an injury or medical condition and it falls outside FSA-eligibility, here's what you need to do:

  • Check with your benefits administrator to see if there is an official form to fill out for the expense to be approved.
  • If your doctor is writing a letter on his/her own, the letter must outline: what medical condition is being treated, a description of the treatment (frequency, dosage), and how long the expense will be needed to treat the condition.
  • A receipt or invoice must be submitted with the LMN for the full price to be reimbursed.

In some cases, benefits administrators may ask for additional information from your doctor, most likely for products/services that also have non-medical uses.

Beyond its direct medical use, most expenses are non-reimbursable if the individual would have purchased it anyway. In other words, this product can't be something you would purchase even if you didn't have the condition. It needs to be directly related to this course of treatment, and the specific use needs to be confirmed by a doctor.

One example is yoga. If you're already paying for yoga classes unrelated to a medical condition, your payments are not FSA-eligible, and these costs won't be covered retroactively. But if a physician recommends yoga to help a specific condition, they might submit an LMN on your behalf, to allow you to use tax-free funds to cover the costs of classes for a set period of time, until the doctor determines your treatment is complete.

With any luck, you shouldn't have any difficulties getting reimbursed for your expense as long as you keep an open line of communication with your benefits administrator and ensure that your physician is as detailed as possible!

New to FSAs? Need a refresher course in all things flex spending? Our weekly Flex-Ed column gives you a weekly dose of FSA Living 101, offering tips for making the most of your tax-free funds. Look for it every Thursday, exclusively on the Learning Center.


Asked and Answered: Can I use my FSA to get my child braces?

One of the great things about an FSA is that it can be used to cover a wide range of medical expenses. But there are so many FSA-eligible items and services, some people miss out on saving for some major expenses.

Well, here's a reason to smile -- if an orthodontist recently recommended braces for your child, you can use your FSA to pay for them.

So, what's covered?

Orthodontists recommend braces for a variety of different reasons. Underbites, overbites, crooked teeth, overcrowding, and gaps all warrant treatment. While many of these issues may seem like cosmetic issues, they can lead to serious medical problems down the road if left untreated. Tooth decay, toothaches, gum disease, and headaches can all develop from misaligned teeth.

Because of this, the IRS defines orthodontia treatment as medical care, which means it's FSA-eligible.

What to expect with treatment and payments

Braces are an expensive, long-term treatment. While the cost will vary based on the severity of your child's case, the average cost of traditional braces is $5,000-6,000.

Fortunately, many dental plans already cover part of the treatment costs. You can then use your FSA to pay for any remaining costs that aren't already covered. And if you don't have dental insurance, your FSA can be put towards the total cost of treatment.

Since braces are usually needed for an extended period of time, payment doesn't always coincide with each treatment. Your child may need to visit the orthodontist several times in a single month (especially in the beginning), and there may be times where you'll go several months without needing an adjustment.

Because of this, many orthodontists offer multiple payment options. These options allow you to pay for everything up front, or set up a monthly installment plan. Regardless of which payment method you use, you can use your FSA to cover the costs.

If you do choose to pay monthly, most orthodontists will require a fee upfront before treatment begins. The good news is that this too is an eligible expense.

If required, most FSA administrators even allow for prepayment of orthodontia expenses. This makes orthodontia treatment unique from more traditional dental procedures like extractions or fillings, which need to be paid for and performed within the benefit period and after the service has been incurred.

So, what are my choices?

There are quite a few types of braces available these days, and fortunately, all of them are eligible for FSA coverage. Traditional metal braces are a popular option since they're the most effective and usually the most affordable.

But your child may prefer a less noticeable option like ceramic braces, which are still mounted to the front of each tooth, but are white so that they aren't quite as noticeable. You might even consider lingual braces, which are worn on the inner-side of the teeth.

Invisalign braces are another popular choice since they're virtually invisible (hence the name) and are considered more comfortable to wear.

Getting braces usually requires X-rays, moldings, and consultation fees prior to treatment. These expenses typically aren't included in the cost of the braces and are billed separately.

The good news is that these expenses are also FSA-eligible, as are additional products that may be recommended by your orthodontist, like headgear, dental wax and elastics, oral remedies for discomfort and irritation, and retainers once the braces finally come off.

From FSA basics to the most specific account details, in our weekly Asked and Answered column, our team gets to the bottom of your most-pressing flex spending questions. It appears every Wednesday, exclusively on the Learning Center. And for the latest info about your health and financial wellness, be sure to follow us on Facebook, Instagram and Twitter.


That's Eligible?! Three of the LEAST-expected FSA-eligible services

Most people with FSA money to spend know that a wide range of everyday medical supplies, services and expenses are FSA-eligible. You know the usual suspects -- bandages, pain relief medications, etc. But, it's possible you might have some other medical expenditures that also fall under the FSA-eligible umbrella.

(Pro Tip: We have approximately 4,000+ FSA-eligible items in our store -- there's a really good chance you weren't expecting all of them to be there.)

It's always worth taking a few minutes to research if any of your health-related costs are covered when planning your FSA spending budget. With that in mind, here are just three examples things you'd never expect to be FSA-eligible:

Companion animals

Let's start off with one of our favorites. Companion animals. These lovable, loyal helpers come in two basic types: emotional support animals for individuals, and therapy animals that are fully obedience trained to assist at hospitals, retirement homes and schools.

Costs related to service animals are FSA-eligible if the person who requires the animal's care has a Letter of Medical Necessity (LMN). This eligibility extends to companion animal needs too.

If a service animal is under your care, the costs related to that animal's well-being, such as dog food or veterinary treatments are FSA-eligible when you provide appropriate supporting documentation. Keep in mind these are also eligible with HSAs and HRAs (if the plan allows), but not with limited care FSAs or dependent care FSAs.

Alcohol addiction treatment

If you are struggling with alcohol addiction and find the treatments to be cost-prohibitive, your FSA can help. Not only are recovery center visits eligible, often including meals and lodging, but if membership in Alcoholics Anonymous is considered necessary for your recovery, transportation to and from meetings also qualifies (your doctor may need to provide you with documentation for reimbursement).

Speaking of which...

Travel for medical care

Getting to and from AA meetings is FSA-eligible because travel and transportation costs for medical care is eligible with FSAs, Examples include:

  • Rental car, bus, taxi, train, plan and ferry fees
  • Ambulatory services
  • Car-related costs including mileage, gas, oil, parking and toll fees

And who is covered?

  • Person receiving medical care
  • Parents required to travel with a child
  • Nurse or caregiver required for treatment
  • Individual required to help a mentally ill dependent safely travel.

Lodging can also be an eligible expense for patients and an accompanying individual, but the amount is capped and the lodging must be for medical treatment and not personal pleasure, recreation or travel.

To be on the safe side, if you're planning on using FSA funds for lodging, it's best to speak with your FSA administrator first to determine exactly what types of documentation they'll want you to collect on your trip to ensure reimbursement by your FSA..

Don't waste time hunting for ways to spend your tax-free funds. In That's Eligible?!, we'll bring you these updates every Monday, so you don't have to. And for all things flex spending, be sure to check out the rest of our Learning Center, and follow us on Facebook, Instagram and Twitter.


That's Eligible?! A little more clarity on FSAs and contact lenses

A few weeks back, we covered some surprisingly eligible ways you can use your FSA to care for your eyes. But we realized that contact lenses probably deserved a little more discussion.

Contact lenses, like eyeglasses or LASIK, can correct nearsightedness, farsightedness and astigmatism. About 20% of Americans who need their vision corrected wear contact lenses. Contact lenses can provide a full field of unobstructed vision, which is great for being active and participating in sports.

And with good reason -- the National Eye Institute encourages everyone to get an annual eye exam. But what happens if you need glasses or want contacts? Can you use your FSA to pay for them?

How do I choose the best contact lenses for me?

Most eyecare centers provide several options for contact lenses. But there are a few factors to consider when choosing the right type of lenses for you. First -- what is the physical material of the contact lenses? Traditional soft contact lenses provide the best comfort and adjust quickly when put in.

But you might also consider harder, gas-permeable (GP) lenses which usually require a little adjustment before they become comfortable. However, GP lenses provide better vision because they have a hard, polished surface that doesn't rip as easily as soft ones. Over time, this could mean real cost benefits.

Are all types of contacts covered?

In essence,if contacts are designed to correct vision problems, they are FSA-eligible. Though insurance companies might have their own policies regarding coverage of specific types or brands of lenses, all are fully reimbursable with your tax-free funds.

Plus, unlike some insurance providers, which may not cover contact lenses in place of eyeglasses, if the contacts are prescribed to correct vision they are eligible, regardless of insurance plan coverage.

So, what isn't covered?

If you're looking to use contact lenses purely for cosmetic purposes -- for example, trying a new eye color, adding to a sick Halloween costume, scaring your neighbors, etc. -- then you can't use your FSA to pay for them.

They may be fun and exciting, but they have no corrective purpose, so they don't make the cut. Don't feel slighted, though -- products and services designed only for cosmetic purposes are never FSA-eligible.


Don't waste time hunting for ways to spend your tax-free funds. In That's Eligible?!, we'll bring you these updates every Monday, so you don't have to. And for all things flex spending, be sure to check out the rest of our Learning Center, and follow us on Facebook, Instagram and Twitter.

Living Well
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FSA Friday - 6/1/18 - Millennials, health benefits and the future

Millennials are a hot topic among employers, and for good reason — they currently make up the largest chunk of today's workforce. With the oldest millennials now approaching their mid-30s, taking over management positions, and the youngest just graduating college, they're present in all areas of the workforce. And they're proving to be pretty skilled at preparing for their present -- and future -- well being.

In this week's FSA Friday, we take a look at this heavily discussed generation, with two articles covering this generation's approach to healthcare, benefits and retirement. (Hint: They're doing it better than most.)

Are millennials the best retirement savers? - Joel Kranc, BenefitsPRO

According to the Report on the Economic Well-Being of U.S. Households in 2017 released by the Federal Reserve, 74% of adults said they were either doing okay or living comfortably in 2017. But less than 40% of non-retired adults think their retirement savings plan is on track.

(Alarming side note: Nearly 25% of non-retired Americans say they have no retirement savings or pension at all.)

But millennials have a different plan. In the J.D. Power 2018 Group Retirement Satisfaction Study, we learn millennials are the most likely of all demographics to set retirement goals and have the highest amount of savings (relative to their career length) in group retirement plans.

In arguably the most interesting fact -- 51% of millennials have set specific retirement goals, compared with 44% of Gen X and Boomer participants. And of that 51%, most say they're on track to meet their goals.

How do millennials make benefits enrollment decisions? - Jennifer Beck, BenefitsPRO

It seems like millennials are more aware of their benefits and well-being. But what exactly do they want from their benefits? And how do they go about deciding which benefits to choose?

In a separate BenefitsPRO article, we learn that Russell Research was commissioned to find the answers to these (and other) questions about employer benefits. Millennials evaluate available benefits by asking themselves three primary questions:

  1. "What essential benefits do I need?"
  2. "Which non-essential options am I interested in?"
  3. "Based on my budget, which of these benefits can I afford?"

Also, they're more cost-conscious than other generations when it comes to benefits. While roughly half of this group keeps budget front of mind when selecting benefits, only 42% of older generations do the same.

The article also dives into how millennials are protection-minded, and how employers will probably need to adapt their benefit packages (and tools to manage them) in order to offer real, relevant value to millennials.

FSA Friday is a weekly roundup of the latest topics, tips and headlines to keep you updated on all things flex spending. It appears every Friday, exclusively on the exclusively on the Learning Center. And for the latest info about your health and financial wellness, be sure to follow us on Facebook, Instagram and Twitter.

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Real Money: What's the deal with FSAs and weight loss programs?

Maintaining a healthy weight has a whole heap of benefits, one of which is warding off medical conditions. Diet and exercise is important whether you're just looking to fit into your jeans or keep up with your little ones. Sometimes you need a little push and signing up for a weight loss program could help keep you accountable and increases your chances of success.

If you believe that weight loss programs qualify for FSA reimbursement, think again. You can only use your FSA funds for weight loss programs in very limited circumstances, and even then, you will likely need to provide proper documentation in order to be reimbursed. Before signing up for any type of weight loss program in which you plan to use your FSA funds, make sure to talk with your FSA plan administrator.

So, what counts?

You're only able to use your FSA funds for a weight loss program if the purpose is to treat, mitigate, cure, diagnose or prevent a specific illness. This condition needs to be diagnosed by a physician and may include conditions such as obesity, heart disease and hypertension. Sorry folks, that means if you're doing it to fit into those jeans, that's not going to cut it.

Once your physician does state that you should lose weight specifically to treat an illness, there may be related expenses that will qualify for FSA reimbursement. This may include membership fees for a weight loss program and when you attend meetings. Gym, health club and spa memberships could be tougher to be qualified, but you may be able to use your FSA on fees for weight loss activities with supporting documentation submitted to your administrator.

If your physician prescribes food that will help you treat your illness, you may be able to deduct a portion of that expense as well. The food can't just be part of your regular diet and must be for the purpose for treating the illness.

In other words, diet pills and meal substitutes probably won't count as an FSA-qualified special food. If there is a special food specifically prescribed to treat your condition, and the cost of that food is more than the cost of a similar food, you may be able to be reimbursed for the difference in cost.

Some FSAs may require a letter of medical necessity or similar form of documentation in order to be able to be reimbursed for these expenses. This letter basically verifies that your weight loss program or special food is specifically for the treatment of a disease. As each FSA administrator has different requirements, you'll want to check with them first on exactly what this letter will need to include.

How much can I submit for FSA reimbursement?

You can only submit FSA expenses that qualify for reimbursement as outlined previously, and only up to the amount you have elected to contribute to your FSA (the 2018 FSA limit is $2,650 and it's possible dependent on plan design that you may have rolled over up to $500 from your previous year's plan for a potential maximum plan balance of $3,150).

If you're interested in losing weight for health reasons, it's best to speak with your doctor beforehand. He or she will be able to assess your situation and see what programs or regiments will help. And if you're interested in involving your FSA with that weight loss goal, you definitely want to check in with your FSA administrator on what will qualify. That way, it's a win-win situation all around: save money on a medical expense and losing weight at the same time.

Whether you budget week-to-week, or plan to use your FSA for bigger things, our weekly Real Money column will help you maximize your flex spending dollars. Look for it every Tuesday, exclusively on the Learning Center. And for the latest info about your health and financial wellness, be sure to follow us on Facebook, Instagram and Twitter.

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FSA Friday - 5/25/18 - Recharge over Memorial Day weekend

Admit it, as you read this, you're already watching the clock. It's Friday… the grill is clean… the lawn is mowed… All you need to do is ride out the work week, waiting for a well-deserved long weekend!

Whenever a holiday weekend comes, there's always a sense of relaxation. But is this a normal response? Or are we just working too hard? In this week's FSA Friday, we look at two articles that seem to indicate we're burning those candles a little harder than usual, both at home and in the workplace.

Half of Americans aren't taking a summer vacation. Here's why - Amanda Dixon, Bankrate

Since Memorial Day is considered the beginning of summer, some of you might be planning a vacation. But you might be in the minority these days. According to a new Bankrate survey, about half of Americans (49%) don't plan to take a vacation this summer. And 25% say it's because they can't afford it, due to a paycheck-to-paycheck lifestyle, and a lack of adequate savings.

This is an eye-opener because of how all age ranges are affected. The article claims that while older Americans are more likely to say they're not going on vacation this summer due to family obligations, millennials skip vacations because there's too much on their plates. But the one common thread is how these different groups often claim finances play a big role in avoiding necessary time away from work.

It seems like people are working as hard as ever, and are hesitant to take time off, even if they need a little rest. At least today's forward-thinking workplaces make it enjoyable to be there, right? Well, maybe not as enjoyable as some employers think.

4 Employee Benefits Better Than Ping-Pong Tables and Free Food - Heather R. Huhman, Entrepreneur

The idea of seeing an office with ping-pong tables, free snacks, collaborative workspaces and team outings isn't newsworthy in 2018. And these perks might not be as important to workers as they once were. While it's fun to have some workday distraction, these boosts have little impact on employees' lives when compared to more meaningful benefits.

In a January 2017 Society for Human Resource Management (SHRM) survey, 3,227 HR professionals indicated that 32% of their organizations were increasing the benefits they offer, to better compete for talent.

Some of the benefits named as important by the survey?

  • Health concierge services
  • Credit card rewards
  • Travel opportunities
  • Sleep assistance

No, that last one doesn't mean sleeping in the empty conference room at the end of the hall. But employers are beginning to see how proper sleep can benefit workers in and out of the office, and have given them access to sleep therapy (and even paid apps) to improve the quality of their workers' rest schedules.

Speaking of which, you're now 10 minutes closer to your long Memorial Day weekend. Be sure to make it a restful, enjoyable one.

FSA Friday is a weekly roundup of the latest topics, tips and headlines to keep you updated on all things flex spending. It appears every Friday, exclusively on the exclusively on the Learning Center. And for the latest info about your health and financial wellness, be sure to follow us on Facebook, Instagram and Twitter.


Flex-Ed: Understanding hormone replacement therapy and your FSA

If you're just starting out with an FSA, or even if you've had one for a while, it can be challenging to understand all the healthcare services eligible to use with your account.

One way to keep this clear is to remember that the IRS only allows you to use your FSA for the costs of diagnosis, cure, mitigation, treatment, or prevention of disease, and the costs for treatments affecting any part or function of the body .

But that still leaves some room for discussion. For example, what about something like hormone replacement therapy (HRT)? Would that be covered under an FSA? In this week's Flex-Ed, let's take a look at the conditions under which HRT would be considered eligible.

When is HRT covered by an FSA?

One purpose of HRT is to help patients deal with several symptoms of menopause. Because menopause is a recognized medical diagnosis, any treatments doctors use to help women deal with its symptoms and complications are covered under an FSA.

Women that are menopausal have a higher risk of bone fractures, heart disease and stroke, so treating menopause is an important part of an overall health maintenance program.

There are many types of HRT treatments, depending on a patient's symptoms. For example, doctors can prescribe medication as well as gels, creams, and patches for patients that experience symptoms like hot flashes.

To be eligible for coverage under your FSA, your FSA administrator may require that your HRT treatment include a prescription and/or a Letter of Medical Necessity (LMN) to detail the diagnosis and overall need for the treatment.

Also for FSA coverage, medication you use to treat your menopause will require a prescription, even if that medication is available over the counter.

HRT expenses that aren't covered

The expenses for any non-prescription medication you take for menopause will likely not be eligible for reimbursement under your FSA.

It's also important to remember that HRT not specifically used to treat menopause or osteoporosis is likely not eligible for reimbursement with FSA funds.

For example, if you're a healthy woman that wants to use HRT to maintain a good level of estrogen, that wouldn't be a qualified expense, and wouldn't be eligible for coverage with your FSA.

In other words, HRT is a treatment that needs the supervision of a medical professional. At least if you want it to qualify for flex spending. This is likely because studies have associated HRT with an increased risk of conditions that include stroke, heart disease, blood clots and even breast cancer.

These risks vary and depend on the kind of treatment plan your doctor orders for your menopause, including the dosage of estrogen you receive, and the length of time you take the medication.

Of course, we're not doctors, and you should always speak with your FSA administrator if you're unsure about any expenses you may incur and whether or not they will qualify under your plan. But if your physician determines HRT can provide you with relief from menopause symptoms and increase your quality of life, using your FSA may be able to help give you some additional peace of mind.

New to FSAs? Need a refresher course in all things flex spending? Our weekly Flex-Ed column gives you a weekly dose of FSA Living 101, offering tips for making the most of your tax-free funds. Look for it every Thursday, exclusively on the Learning Center.