Sure, appropriately spending your FSA funds on eligible items and other out-of-pocket health care costs like copays and deductibles, or submitting receipts for eligible expenses before the deadline can be daunting.
And while it's true that FSAs (unlike HSAs) don't roll over from year to year, you are able to recoup some of your unused FSA funds at the end of the year. Here's how.
FSA deadlines, for the newcomers
If you've visited our Learning Center before, you probably noticed we spent a lot of time focused on the 3/15 Grace Period Deadline. That's because many FSA plans have an end-of-year deadline of Dec. 31, with many offering a grace period to extend that deadline until the middle of March.
But be sure – and we cannot stress this enough – to check with your plan administrator to confirm this deadline, as well as whether your plan offers a grace period, a runout period, or rollover options.
If you confirm you have a Dec. 31 deadline and a grace period, the next FSA date to mark on your calendar is March 15. This marks the end of your grace period. Having a grace period means you have until March 15 to spend your FSA funds from the previous year before forfeiting the cash. Then there's your runout period deadline of March 31 which is offered only by some plans. This is the deadline to submit receipts for FSA-eligible expenses you incurred before Dec. 31.
If you don't have a grace period option, you may have the option to roll over up to $500 of your unused FSA funds from the previous year. More on that in the next section.
Tell me more about FSA rollovers
So you've spoken to your plan administrator and determined that you have the option to roll over $500 of your unused FSA funds from last year. This is great news. For one, it means your unused FSA funds aren't totally lost. Moreover, an extra $500 is no paltry sum.
Use it to start your FSA on the right foot this year. Save it for an upcoming procedure, a large FSA-eligible purchase you anticipate this year, or even just everyday FSA-eligible items like contact solution or allergy medication (which is eligible with an Rx from a doctor).
(I know we blow through both of those items at my house, especially during allergy season.)
This $500 could make a huge dent in your estimated health care costs this year. We're not just talking about buying bandages and athletic tape.
Is an FSA right for me?
Still unsure as to whether an FSA is the right option for you? After all, you're young and healthy and aren't expecting any big health care expenses this year. Plus, that's a lot of money to take out of your check each month. But FSAs can be used to pay for a variety of health care spends, from screenings for women to new parent must-haves, even some baby health supplies.
While there is no right answer when it comes to whether an FSA will work for you and your financial situation, here's a quick FSA fact sheet.
- FSAs are deducted from your salary pre-tax, which means you save money on taxes for eligible health care expenses, plus it lowers your taxable income.
- An FSA also helps to cover the out-of-pocket costs of high-deductible health plans (HDHPs), which are becoming an increasingly common health care option for many employers.
- You also may have the option to roll over $500 of your unused FSA funds from last year or a grace period with remaining time to use your dollars which means the old use it or lose it rule may not entirely apply.
No matter how you manage your unused FSA funds, it's always nice to know that "use it or lose it" doesn't have to be a burden. With a $500 rollover, you'll be able to create a budget that works for your family's specific needs, without deadlines looming over your head.
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 FSAstore.com Learning Center.
Tax day is here. If you're one of the 30 million Americans who did not withhold enough money throughout the year and now owe money to the IRS as a result, it's probably not the most festive time of the year.
But here's the good news — if you're also one of the 35 million Americans who have an FSA, then it's the perfect time to check on your account and make sure everything is up-to-date. After all, when you owe money (or narrowly escaped owing money!) every dollar counts.
Always speak with a tax professional to get proper advice for your own tax situation. But in the meantime, here's a few tips we find helpful when assessing our FSAs during tax season.
Don't worry about extra filing steps
First off, breathe easier knowing this fact: Unlike HSAs, which need to be reported on Form 1040, there are no reporting requirements for FSAs on your income tax return. There's one less thing to worry about!
But you do need to be wary of your deductions! Because you can't -- no matter how tempting it might be -- deduct qualified medical expenses if they were paid with tax-free FSA dollars. And that includes any money you forfeit at the deadline. If you have any unused cash in your FSA, since you already got a deduction, you can't deduct the loss.
Double check the rules
If you don't understand the unique rules for your FSA, then you may miss out on potential benefits like "run-out" periods, grace periods and rollovers. Because plan providers are not required to offer any of these perks, they vary from plan to plan. Take a few minutes to check in with your plan provider and brush up on the rules for your FSA. It's time well spent.
For most FSA owners, whose plan years end on 12/31, these extended deadlines have come and gone. But if your FSA operates on a different calendar, some of these perks might still be available to you, so you don't lose your funds.
To do: Check in with your human resources department and explicitly ask if your employer plan offers any of these three options for FSA users: "run-out" periods, carryovers and grace periods. (And make a note, so you don't fall into the same problem this time next year!)
File for reimbursement
Whether you have a "run-out" period and have expenses from last year or you have new expenses from this year, it's important to file for reimbursement with your employer. In fact, it's especially during tax season because it might mean that you get unexpected money from your FSA for eligible expenses that you've already purchased.
The process of filing for reimbursement varies from plan to plan, but it usually involves the following steps:
- Knowing your deadlines. There's a deadline for when you'll need to submit any requests for reimbursement, so keep track of your plan details.
- Then you'll want to gather your receipts. Whether it's for prescriptions, copays or eligible health products, you need to get organized.
- Next, you'll file with your FSA provider. Usually, you will file for reimbursement online or through a mobile app. However, you might also be able to submit your claim my email or mail. As usual, it all depends on your plan.
- Finally, you will want to track the reimbursement to make sure it's deposited into your account or cash the reimbursement check once you receive it. This is also the perfect time to note how much money you have left in your FSA for the rest of the year.
Take another look at your expenses
Now that you've gathered your receipts and filed for reimbursement, it's time to double-check your expenses. There are a lot of common expenses that you probably know are covered — copays for doctor visits, home medical items and even acupressure products to relieve pain — but there might be some expenses you made that you didn't even know were eligible. It's worth a second look.
To do: Skim through the FSA eligibility list to check for possible expenses that you missed.
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.
Having an FSA grace period is sort of like getting an extension on a final paper in college in that it gives you more time to use the funds from your prior plan year. If you still have 2018 FSA funds leftover after the 12/31 deadline, the FSA grace period is almost here!
Watch the video below to get a quick rundown of FSA grace periods, so you can make the most of those remaining funds before they're gone!
And for a closer look at FSA grace periods, along with some other FSA options you might not even know about, check out
The Simple Guide to decoding the FSA grace period, rollover & run-out.
Spring officially started last week, and it's hard to believe that March is almost over. While you're focusing on the beautiful weather that spring has in store, it's also a good moment to evaluate where your Flexible Spending Account (FSA) stands.
March is a big month for many Flexible Spending Accounts. There are a few big deadlines that occur for FSA plan years that ended on December 31, 2013. A lot of FSAs have a grace period and/or a run-out period that are ending in March.
So, what's the difference between the two?
- If your FSA plan has a grace period, you have up to two-and-a-half months at the end of your plan year to spend unused FSA funds and incur new FSA eligible expenses. Any money that's leftover at the end of the grace period is forfeited due to the “Use it or Lose it" rule. You cannot cash out any remaining FSA funds, as money can only be used for FSA eligible expenses. For example: If you had a December 31 FSA year deadline, your grace period would allow to use your 2013 FSA funds through March 15. A grace period is optional, and the specific deadline also depends on when your plan year ended.
- If your FSA plan has a run-out period, you have an extended time at the end of the FSA plan year to submit receipts for reimbursement. You can only get reimbursed for claims incurred during the previous FSA plan year. The run-out period is usually 90 days after the plan year ends. For example: If your FSA plan year ended on December 31, the run-out period ends on March 31, 2014. The run-out period is optional, and its deadline date is determined by when your plan year ended.
Chances are you have either a grace period or a run-out or both, but because these are optional, it's best to check in with your FSA administrator. If you aren't sure who the FSA administrator is, you should consult your company's HR department to find out.
Learn more about your Flexible Spending Account via the FSAstore.com Learning Center. If you have a question, feel free to comment below on this blog post, too!