How to use your flexible spending account balance before it expires
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Some employees with flexible health spending accounts may be on the verge of giving their employers an unintentional gift this holiday season.
According to ongoing research, each year, the share of employees who miss the typical Dec. 31 deadline to spend their FSA money and lose it to their companies is between 40% and 50%. Research from the Employee Benefits Research InstituteIt began tracking FSA data in 2019. Although some companies give extensions to account holders, most (about two-thirds) use the use-it-or-lose-it rule.
“People tell us that one of the main reasons they lose their FSA funds is because they didn’t realize there was a deadline in the first place, or they didn’t know how much was left in their account,” said Rachel Rouleau, chief compliance officer at Health E-Commerce, FSA Store’s parent company.
Don’t confuse your FSA with HSA
Total US healthcare spending $4.9 trillion in 2023According to the latest data from the Centers for Medicare and Medicaid Services. That year, out-of-pocket spending increased 7.2% to $505.7 billion.
As health care costs increase over the years rate is above general inflation — FSAs have gained popularity as a way for workers to set aside pre-tax money to cover medical expenses. In 2024, nearly three-quarters (72%) of state and local government workers and 47% of private sector workers had access to health FSA. According to the Bureau of Labor Statistics. This rate was 60 percent and 40 percent respectively in 2015.
The contribution limit for health FSAs will be $3,300 this year and $3,400 in 2026.
FSAs are different from health savings accounts, or HSAs, which some people use with high-deductible health plans. While both allow you to set aside pre-tax money for medical expenses, HSAs do not come with a use-it-or-lose-it provision; You can leave the money in the account as long as you want.
“People confuse FSAs with HSAs, thinking they’re the same thing,” said certified financial planner Bill Shafransky, senior wealth advisor at Moneco Advisors in New Canaan, Connecticut.
The average amount for FSA holders who lost money in 2023 was $436, according to the Employee Benefit Research Institute.
Use remaining FSA funds ‘to your advantage’
If you have an FSA, first check if your company’s plan year ends on December 31; Most do, but there are some employers whose plan year ends in a different month.
Also see if your employer offers up to an extra 2.5 months to spend your balance on eligible new expenses or allows you to transfer a certain amount (up to $660 this year). They cannot provide both options.
Additionally, many employers give you extra time (usually three months after the deadline) to submit receipts for expenses incurred in the previous plan year.
Shafransky said all hope is not lost for workers who do not have a grace period or right to transfer. “Use eligible spending to your advantage as we approach the end of the year,” he said.
For example, the average household spends $1,600 a year on FSA-eligible items, according to FSA Store estimates, Rouleau said.
He said the list of products covered is long and includes things like cold and allergy medications, acne patches and cleansers, over-the-counter pain medications and menstrual care products. There are also health technology products such as light therapy devices and migraine relief masks to treat pain or acne.
This includes doctor and dentist appointments, prescription medications, and other health services such as acupuncture and addiction treatment.
There are ways to find out if you have money left in your FSA or if you don’t know your company’s rules.
Most plans offer an online portal where you can review your balance, submit claims and check deadlines, Rouleau said. The FSA administrator’s information is usually listed on the back of your FSA card, he said.
“If you’re not sure who your FSA administrator is, your HR department can point you in the right direction,” he said.
