There’s one basic rule when it comes to a flexible spending account (FSA): if you don’t use it, you’ll lose it. So as the year-end fundraisers rage and various causes compete for your donations, don’t miss your chance to use all your flexible spending account dollars. Here are some common questions to help brush up on how this account works, plus some unexpected ways to spend the funds.
What is a flexible spending account?
Your employer may offer an FSA (also called a flexible spending arrangement) as part of a benefits package. This account usually is funded automatically from your paycheck and can be used to pay for certain approved health-related expenses. FSA dollars are deposited before taxes, pre-tax, reducing your taxable income. If you know you are going to spend money on health expenses, then this essentially saves you money.
How does a flexible spending account work?
At the beginning of each year, you determine how much you want to contribute to your FSA. Some employers may also contribute to FSAs, but the total annual amount cannot exceed the allowable limit. Each year, the federal government determines the maximum annual contribution allowed for an FSA (the 2020 limit was $2750).
To make a transaction, many FSAs supply you with a debit card to use for purchases and co-pays. Otherwise you can submit the receipts to your employer for reimbursement from your FSA. Either way, it’s imperative to save receipts from approved purchases, appointments, and procedures.
One of the perks of an FSA is that the annual amount is available immediately for approved costs. This means you don’t have to accrue the amount each month; however, if you change companies mid-year and have used all of your FSA funds, you may owe your former employer the difference. Similarly, if you leave your company, you forfeit any unused funds in the FSA because the employer owns the account.
5 Uncommon ways to use your FSA dollars
Copays and prescriptions are almost always covered by FSAs, but there are some coverages that are less obvious, such as bandages, hearing aids, and mileage for medical reasons. If you need to use up your dollars before year’s end, here are some ideas:
- Incontinence products. For 1 out of 3 women, incontinence is a problem. And over time, the costs of pads and related expenses can add up. Even though you may use your FSA money to purchase incontinence pads, a smarter investment would be to use those same funds to purchase an FDA-cleared Kegel exerciser, like ELITONE to treat incontinence. This device is worn externally and tones your pelvic floor muscles to decrease or even eliminate bladder leaks, plus you do not need a prescription.
- Prescription sunglasses. Many insurance plans cover an eye exam every couple of years, but when it comes to frames and lenses, you’re often on your own. Not only does an FSA cover prescription eye glasses and contact lenses, but also prescription sunglasses, contact lens supplies, and over-the-counter glasses, better known as “readers.”
- Pregnancy tests and breast pumps. Some things you just need to know right now. And determining whether or not you’re pregnant is one of those important moments. Pregnancy tests and fertility products are both allowable FSA purchases. And when you’ve finally reached the milestone of being a new mom, that electric breast pump you’ve been eying is also eligible.
- Acupuncture. At first glance, this traditional Chinese treatment may seem outside the scope of allowable costs. However, acupuncture is an approved medical expense, even without a prescription. Alternative treatments often are not allowed under FSA rules, so it’s best to double check with your provider.
- Sunscreen. It used to be that only sunscreen with an SPF of 15 or higher was eligible under the FSA guidelines. But the CARES Act of 2020 during the COVID pandemic added considerably to the list of allowable products. The resulting list includes all SPF levels.
- Other FSA-eligible items. Acne medication, air purifiers, lodging for medical care, tampons, and weight loss programs.
Just as you would check on an insurance policy, always confirm ahead of time any irregular purchases you plan to make with your FSA funds. There are so many practical ways to use your hard-earned dollars, so don’t let them go to waste!