Flex-Ed: How to fix mistakes with FSA funding and reimbursements

Mistakes are common. But when you make a mistake with your FSA reimbursements or funding, you need to be able to fix them ASAP, so you're not caught paying for them later. As in, you want to be sure that you're using your FSA correctly so that you're not required to pay your reimbursements back or stuck with money you can't use.

Sure, you can have the best-laid plans, but stuff happens. Instead, take a look at the following scenarios in case you made one of those mistakes, and what you can do about it.

Your receipts weren't clear

Just because you know what you spent your money on, doesn't mean your FSA administrator is clear on it. Yes, you have receipts backing up your purchase but that doesn't mean it automatically counts as solid proof.

Let's say you purchased got a prescription for a bunch of antibiotics at the pharmacy. You decided to submit the credit card receipt to your FSA provider. Unfortunately, that's not enough proof because the IRS requires you have an itemized receipt.

If your FSA administrator comes back to you and says your original receipt isn't acceptable proof, you should be able to resubmit. Now's the time to find that itemized receipt — whether it's your prescription with the price on it, or go back to the pharmacy if you need to and see if they'll print another one for you.

Otherwise, you can submit what's called an Explanation of Benefits (EOBs) that you'll receive in the mail from your health insurance provider -- basically, a fancy way of explaining a part of your transaction. What it needs to include is your name, date of purchase, the provider/retailer's name, price of the item, and the name of the item or service. Don't worry though - this is standard information to be included on all EOBs.

Even if you made the initial mistake, you can still fix it as long as you provide ample proof as quickly as possible.

You overallocated your FSA

Maybe you overestimated how much you'll need and you contributed a bunch of extra money to your FSA. Now you realize, you may not have enough qualified medical expenses to spend it all. The good news is that it's still your money. The bad news is that you're at risk of losing it of you don't take action.

Before assuming you don't have enough qualified medical expenses, make a list of things you may need. Perhaps it's time to replace your broken pair of glasses, or you're eyeing that foot circulator but were scared to make the purchase. Be strategic about what you want to purchase and make sure it's something you need, and you're not spending money just to spend it.

Something else to consider is looking into your FSA plan to see if there's a rollover option — typically up to $500 per year — or you may be able to take advantage of a Grace Period, if you have one, giving you extra time to spend down your funds. This way, you can still keep your cash longer without feeling like you have to buy things you don't need (which you shouldn't do, anyway).

Keep in mind that you won't have both the rollover and Grace Period option, and plans are not required to offer either so map out your purchases depending on what your plan offers.

You submitted an incorrect claim form or have no matching receipts

Don't freak out. If you submitted the wrong form, contact your FSA provider right away and see if you can resubmit. It's as simple as that. However, if you make a purchase and don't have a matching receipt, you may be able to substitute one from another qualified transaction.

Let's say you purchased prenatal vitamins and sunscreen and realized you don't have the receipt. Instead, you may be able to find another receipt for a qualified purchase to offset your original purchase. Maybe you buy additional sunscreen or more prenatal vitamins at a different store and submit that receipt, instead. Note that not all administrators will allow this, so you'll want to contact them to find out about your options.

In some cases you may not even need to submit a receipt, although we always advise that you keep them just in case. For example if you used your FSA debit card to make a payment and at a qualified merchant with the proper system in place, your expense may even be automatically approved without the need for documentation.

Mistakes happen to the best of us. The important thing is to recognize them when they happen, correct course and try not to let it happen again.

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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.


Flex-Ed: The most-common FSA card misconceptions

FSA cards make life easier. With an FSA debit card, you no longer need to remember to file paperwork and wait for your purchases to be approved. Instead, you can access the money in your flexible spending account when you need it.

Here's how it works—you've been shopping online for qualified health related items and are finally ready to checkout. With an FSA card, the process is easy. You enter your FSA debit card information like you would with any other debit card and the funds are automatically deducted from your account. It really is that simple.

But here's the deal: even though FSA debit cards are easy to use, there are still some misconceptions about how to use them. Here are six of the most-common FSA card misunderstandings and how to avoid them.

Misconception #1: I lost my card and can no longer access my FSA funds.

We just covered this a few weeks' back, but it's worth mentioning. Because it's annoying to lose a credit or debit card! Luckily, it's not the end of the world. In order to replace your card (and make sure no one else is accessing your funds!), you need to call your plan administrator and report the card as lost or stolen.

Plus, you can still buy FSA-eligible products and pay for your services while you wait for your new card. Instead of using your card, you can use a different payment option, then file for reimbursement with your plan administrator (in all cases, make sure to keep receipts).

Misconception #2: Once I receive my new FSA card, I can use it immediately.

Easy, now! Before you can begin to use your FSA card, you'll need to activate it. The activation process can vary, but it's similar to what you do for any other new credit or debit card. Follow the activation instructions on the card and you'll be ready to spend in no time.

Misconception #3: I don't need to save my receipts

Let's bury this idea now. Yes, your FSA card makes it much easier to track and itemize your spending, but it's a really good idea to still save your receipts. According to the IRS, all FSA purchases must be substantiated.

This means that if your employer gets audited, you can show itemized documentation of your FSA purchases. In addition, your administrator might ask you to submit receipts on some FSA card purchases, in case there's some confusion about eligibility.

Bottom line? Be organized, so there's no headache at the end of the plan year.

Misconception #4: As long as some of the items I'm buying are eligible, it's okay to use my FSA card.

You can only use your FSA card for FSA-eligible items. That means that you can't tack on a few groceries with an FSA-eligible baby thermometer at the same time and use your FSA card to pay for it. Chances are you wouldn't get very far with the idea anyway, because most administrators have the cards set up to only approve allowed items. When you use an FSA card, all the items you buy must be FSA-eligible.

We repeat - all items.

We know it can be difficult to remember which items are (and aren't) FSA-eligible -- especially when using it at pharmacies that carry a wide range of items. In order to avoid any confusion, it might be a good idea to shop at stores that only sell FSA-eligible items and save yourself an unnecessary hassle later down the line.

Misconception #5: I can use my FSA card at an ATM.

FSA cards are similar to regular debit cards and most even come with PIN numbers, but there are some notable differences, and one of those differences is that you cannot use your FSA card to withdraw cash from an ATM. You can only use your FSA card to pay for eligible healthcare expenses, using your available funds.

Speaking of which...

Misconception #6: I can still use my FSA card even if there isn't money remaining in my FSA.

Nice try! But, like any debit account, in order to use your FSA card, you must have sufficient funds in your FSA. Your FSA card will be declined if there isn't enough money to pay for your purchase.

FSA cards are a great way to simplify your healthcare shopping, but there are still rules to follow. Here's the good news: if you can avoid these common FSA card misconceptions now, you'll avoid a world of headaches down the line.

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.