As you probably know from looking around our site, the 12/31 deadline is just about here. It's an exciting time for us, of course. But it's also an exciting time for FSA owners who have the chance to make the most of their tax-free funds, rather than forfeiting them due to the "use it or lose it" rule.
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, people usually don't have any trouble using their FSA funds.
Still, with the deadline here, we thought it would be a good idea to revisit the most common questions about 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.
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.
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 health care 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 FSAstore.com Learning Center. And for the latest info about your health and financial wellness, be sure to follow us on Facebook, Instagram and Twitter.
FSA cards are pretty common these days – almost every FSA provider gives you one to help using your funds (and tracking your spending) easier. But if you're new to FSAs (or at least new to these cards) you probably have some questions about how they work, where they can be used, what they're NOT for, etc. etc.
Well, if you haven't figured it out by now, we love making guides for these types of things.
A big-picture look at the humble-but-awesome FSA card
Flex spending cards are essentially the same as debit cards but used only to cover eligible medical expenses. In some cases, FSA holders who wish to access their funds are required to pay an out-of-pocket expense, and then submit receipts to their benefits administrator. Employees get reimbursed once the paperwork is submitted for eligible expenses.
FSA cards make the reimbursement process much easier by automatically withdrawing funds from the debit card. However, if an FSA holder opts to make a purchase with his/her card for a product or service that is a non-health care merchant, this merchant has to support an inventory information approval system (IIAS).
We could go into a lot of details about these systems, but there's no need to bore you with jargon. The key takeaway about these systems is: They verify eligibility so you're not hit with a surprise denial. When you use your card, the computers immediately recognize eligible vs. non-eligible expenses, so you can shop accordingly, and play by the rules!
That's basically it. BUT, if you ventured here wondering about the difference between FSA and HSA cards, guess what? They function in the exact same ways. And the information below will help you understand how to handle your card.
Ways to check the balance on your FSA card
- Log into patient portal
- Use the provider app
- Call TPA at the number provided
- Some retailers might also have balance information available at the bottom of their receipts.
Waiting to get reimbursed for an FSA-eligible item the traditional way can be a little mind-numbing—filing paperwork with your FSA administrator, waiting for approval and paying out of pocket in the meantime. Luckily, the FSA card streamlines the process.
The reason? Your FSA card is linked directly to your FSA. But here's the deal, FSA cards are slightly different than standard debit cards and come with their own set of rules. Here's what you'll want to keep in mind.
You can't withdraw money from an ATM
A significant difference between the FSA card and a standard debit card is that you can't grab cash from an ATM using your FSA funds. No - this is strictly for eligible health care expenses.
The easiest way to be sure your purchases are eligible is to shop at a store that exclusively sells FSA-eligible items (hint, you're already here). It removes the guesswork and allows you to focus on getting the items you need without having to file for reimbursement.
You can't use it in every store
It might sound obvious, but it's important to note that you can't use your FSA card at just "any" store, unless the purchases are eligible for FSA reimbursement.
In order to be able to use your FSA card, either the merchant category must be approved by the FSA administrator or card issuer, or the merchant must be specifically approved or the merchant must have a system in place to allow the use of the card on FSA-eligible items.
What to do if your card is lost
Having your payment information or identity stolen is about as scary and uncomfortable as it gets. And having it happen to your FSA is no different. But it's important to not panic.
We know money is money, but these accounts are as safe as any other banking you might do -- as long as you're careful and have good records of your purchases (yes, even with the card) all will turn out right.
What happens if I lose my FSA card or get hacked?
If a fraudulent purchase has been made with your FSA, you'll need to notify your administrator immediately so that they can open an investigation. Once the investigation is completed, your funds will be reimbursed into your account.
Keep in mind, your account will likely be shut off until the investigation is complete, and a new card will have to be sent to you. Keep this in mind when making additional purchases, so you can still use the traditional reimbursement approach to access the tax-free funds.
How to keep your FSA safe
While there isn't a 100% guaranteed method to preventing fraud, there are steps you can take to help keep your FSA safe. You'll want to treat your FSA card (and all of your account info, for that matter) with the same care and precautions that you would give any debit or credit card.
An FSA card doesn't have nearly as many places where it can be used, it's still a source of funds that people can purchase items they need. And because of that, it's important to treat FSA fraud like any form of card theft.
First off, it's pretty clear you should keep your physical card in a safe place where others can't easily access it. You should sign the back of your card as soon as you get it, and never store a PIN with the card.
Also, don't give your card number to anyone you don't trust. We could do another guide of all the places NOT to give your card number. But for now, one place you definitely shouldn't is over the phone, unless you're the one who made the call to a business or medical office, so you know the people you're speaking to are legit.
If you do give your card number out over the phone, make sure you're speaking with a reputable outlet, and are in a private place where others can't overhear the information.
(And never, ever provide your card number through email. No reputable store would ever ask you to do this. Shop smart, everyone!)
If you're making payments online, be sure to use a secure connection. Never make payments or enter your info over a public Wi-Fi connection. This makes you vulnerable to hackers who can easily access your account. Only make purchases from merchants that you trust who have a secure website.
Your FSA plan administrator is your friend
This all may seem obvious … but just for peace-of-mind and a quick resolution to any problems you might have, reach out to your plan administrator, to see their policies on processes, proper card use, etc. And always keep a copy of your confirmation for your records.
They can probably help you better organize and protect documents and receipts that may contain sensitive account information. And they can help keep your contact information up-to-date so no one else can try to access your account using older information.
What to do if your FSA card is declined
It's embarrassing when your credit card is declined because it feels like everyone in the store is looking at you. The good news is that you typically know how to handle it: call the bank, try a different card, or check your balance.
But what happens if your FSA claim is declined? It often feels similar, but the next steps can be confusing. Here's what you should know.
Regardless of why your card was denied, there's no need to be embarrassed. It doesn't mean you've done anything wrong and there's a good chance it's not even your fault. There are a lot of reasons an FSA claim might be denied -- and most have an easy fix. The first step is to figure out whether or not your card has been activated.
No, we're not kidding. Forgetting to activate your card is a common oversight with a simple solution: call your administrator or explore your company's benefits website to learn how to activate your card.
Double check your funds
Let's be honest: sometimes it's hard to keep track of everything and that includes your FSA card balance. If your FSA claim is denied, it might be because you had insufficient funds in your account or that the price of the item you tried to purchase is higher than your balance. Be sure to check your balance before you use your card again.
Make sure the merchant accepts FSA cards
For the most part, your FSA card should work where it makes sense; at locations like pharmacies, vision centers, doctor and dentist offices, etc. But if you try to use your card at a restaurant or bike shop, even if that bike shop happens to sell FSA-eligible bandages, chances are your card won't work.
If you have questions about whether or not a specific merchant will allow your FSA card, you can contact your FSA administrator to find out.
(But let's be honest, did you really think a restaurant was going to accept pre-tax health care funds for that lobster roll?)
The easiest way to ensure that your items or services are eligible is by checking out our comprehensive Eligibility List, and by shopping at a store that exclusively sells FSA-eligible items. It takes the guesswork out of shopping and decreases the chances that your FSA card will be declined.
Confirm with your employer that the item is FSA-eligible
The IRS determines which items are FSA-eligible. But employers can set their own eligibility rules as long as they're sticking to the IRS guidelines. In other words, it's important to check in with your FSA administrator and confirm that the item you tried to buy is FSA-eligible.
If your FSA card was declined but you decided to buy the item with a different card, then it's still a good idea to try and get reimbursed through traditional means. If you bought the item through FSAstore.com and the item was allowed under your plan guidelines, we guarantee that the item is FSA-eligible, so be sure to save your receipt and submit for reimbursement.
Other helpful FSA card tips
You should still save your receipts
Even though you won't need to file your receipts for reimbursement after every purchase, you'll still need to save your receipts. The IRS requires all FSA purchases be backed up with proof, so if your employer gets audited, you'll have to show itemized documentation of your FSA card purchases. Your administrator will also require you to submit receipts on select FSA card purchases.
In nearly every situation, the card will be accepted and processed without worry. But there's no better way to fight off "unpleasant surprises" than by keeping good records. You should always keep paperwork for charges, not just in the event of a denied charge. Depending on where you use the card, you may need to submit a receipt or documentation even if it was approved.
Why? Because if your benefits administrator denies an FSA card charge, having this paperwork handy to verify eligibility will save you time and hassle down the line.
Pro Tip: Use electronic receipts whenever possible. Just create a file in your inbox and simply move your receipts there throughout the year. It's a painless way to ensure you're following the rules.
You can still file manually
By now, you've probably figured out that an FSA card makes life simpler, but like we mentioned above, you don't have to use it. If there's ever a time when you forget it at home or are working with a medical provider that doesn't accept it, then don't worry. You can still file for reimbursement the old-fashioned way and submit receipts to your FSA administrator.
Each month, FSAstore.com features one of our valued partners as part of our newsletter. This month, we’re happy to present a partnership spotlight on J.W. Terrill. As a market leader in Flexible Benefit administration, J.W. Terrill offers a team of outstanding client service professionals backed by innovative systems and technology – including the use of the TerrillFlex™ Debit Card System.
How important is having access to FSAstore.com for your participants?
FSAstore.com is a valuable resource tool that we are able to provide to our participants as well as to our employer groups. The site makes it easy for participants to view what is FSA eligible and maximize the benefits of their plan. We have had many positive comments about the site and participants really like the money saving coupons that are offered.
Which FSAstore.com tools (Learning Center, Eligibility List, and Calculator) do you think add the most value for your participants?
We have found that our participants are utilizing the Eligibility List more often and are becoming more aware of the items that are eligible. The Learning Center is helpful especially to our employer groups implementing an FSA for the first time, providing information to help them understand the administration and flow of their FSA plan.
What sets J.W. Terrill apart from other FSA administrators?
As a market leader in Flexible Benefit administration, J.W. Terrill offers a team of outstanding client service professionals backed by innovative systems and technology – including the use of the TerrillFlex™ Debit Card System. The TerrillFlex debit card allows our client’s employees immediate access to their accounts by paying for eligible expenses at the point of service with a debit card. J.W. Terrill key component is flexibility: meeting our client’s needs and maintaining compliance. As part of an agency we are able accommodate the special needs or custom requests from our clients. Our benefit administration team of professionals brings years of combined benefit administration experience to our partners.
How do you keep participants aware of upcoming FSA deadlines? Can you discuss how you use your blog (TerrillConnect) and social media (Facebook or Twitter) to keep participants informed of deadlines and other relevant news?
J.W. Terrill communicates FSA deadlines to the participants primarily through email or other media. We regularly reach out to our employers to encourage communication to their employees, and our FSA participants. Currently, we notify clients regarding the changes of FSA through our blog, email blasts, and other social media communication tools.
How do you keep your participants abreast of changes to their FSA (whether Health Care Reform or even the U.S. Treasury “Use it or Lose it” rule)?
TerrillConnect; a value added service for employer groups and our clients to stay up to date with Health Care Reform changes and regulations. Webinars are scheduled for many topics to educate and inform such as Use it Lose it rule. Our webinars are geared for the employer group and participants to maximize their benefit offerings.
Are participants confused about how to use their FSAs? (i.e. do participants ask questions about what products or services are covered?).
A majority of our participants have been in an FSA for many years and are familiar with the program. We direct our seasoned participants and our new participants to the FSAstore to view the listing of eligible items and encourage them to take advantage of all the services offered by the FSAstore. The seasonal creative ad campaigns are most useful to help our participants utilize their funds year round.
Can the industry improve education efforts about FSAs, HRAs and HSAs? How?
Improvement is always needed in any area you want success. J.W. Terrill is committed to providing education services for our employer groups and participants through webinars, seminars and enrollment meetings for the participants. The information provided on the FSAstore.com Learning Center is a valuable resource for our participants.
If you use SIGIS, do you think SIGIS adoption is beneficial for third party administrators? Why?
JW Terrill uses SIGIS when establishing the parameters for the FSA debit card. We find it beneficial as it enhances the capabilities of the FSA debit card, by allowing the participants to purchase eligible over the counter items.
Any other positive feedback you want to share?
We would like to acknowledge our Account Manager Dana (Chuprinski) Gambino for her assistance and direction to enhance our communications to our participants regarding FSAstore. She has been part of our team during the implementation of this program, and we look forward to continuing our relationship with FSAstore and the service platform.
Flexible Spending Accounts will reimburse you for incurred expenses during your FSA plan year (period of coverage).
“Incurred" refers to expenses that happen after a service or product is provided – not when you are billed or pay for the service. You cannot be reimbursed in advance for any services.
Because FSA funds are available to you on the first day of your plan year, you must be able to receive full reimbursement for your contribution.
So, if you opted in for $1,200 a year for your FSA, you could use that amount on the first day (if you wanted to).
You can submit for FSA reimbursement in two ways:
1. Your FSA Administrator might provide you with an FSA Debit Card to use toward FSA eligible expenses
You'll be able to use the card at approved stores or pharmacies (we accept FSA Debit Cards and all major credit cards at FSAstore.com!)
By using the FSA debit card, your expenses are auto-adjudicated (electronically approved or disapproved) from the card and you may not need to submit additional receipts to your FSA Administrator.
Some FSA Administrators could still require a receipt to substantiate a claim. Check with your FSA Administrator about reimbursement procedures for your plan. The FSA Debit Card would not be charged if something is not considered FSA eligible under your plan.
2. Your FSA Administrator might require you to submit paper receipts on eligible expenses.
You'll have to typically submit a reimbursement claims form with:
- your personal details,
- product/service details(provider information)
- amount owed
- date of service provided
FSAstore.com can provide you with an itemized receipt after you make your order to submit to your FSA Administrator for FSA reimbursement.To learn more about claims and other account management tips, explore our FSA Learning Center.