The Patient Protection and Affordable Care Act signed by President Obama in March made a bunch of major changes to health care in America and one of them was to flexible spending accounts. Starting in 2011, over-the-counter products will not be eligible for flexible spending accounts. In fact, they will not be reimbursable under FSAs, health savings accounts (HSA), or health reimbursement arrangements (HRA) unless they are prescribed by a physician. There is only one exception and that’s for insulin.

This means that the days of loading up on band-aids, Tylenol and Advil, and other products you pick up in the drug section of your supermarket are no longer eligible unless your doctor prescribes it. While the rules on what is necessary documentation for reimbursement have yet to be introduced, this might start introducing additional paperwork at the doctor’s office. Advising to take two aspirin and calling it a day might have to come with a prescription.

Also, annual contribution limits to your FSA will be limited to $2,500 a year.

The last post on how to spend down your FSA was designed for folks who have just a few dollars left in their account. If you have a few hundred dollars left, you need to do more. You still have to spend it, because FSA balances are lost if you don’t spend it before the year ends, but you need to adjust your FSA amount down to more accurately reflect how much you need. It’s great to have that tax-free money to spend on medical supplies, as long as you need the medical supplies!

This is how we go about setting our FSA amounts.

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With the end of the year rapidly approaching, chances are you still have a few dollars left in your Flexible Spending Account (FSA), if you have one. The old backup solution is to stock up on over the counter supplies but that might not be the most effective use of your FSA dollars. OTC products are great as a backup, but there are a few things you should try to do before just buying a million bottles of Advil.

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Yesterday, my wife quit her job of nearly four years in the middle of the worst economic recession in many many decades.

Wait, that’s probably not framed in the best way. How about this:

Yesterday, my wife quit her job of nearly four years to pursue a doctorate at the University of Maryland.

Better?

Either way, neither one of us has a “traditional” job. As such, we’ve had to make a few adjustments in our life for the period between when she left her job (yesterday) and when she’ll start graduate school.

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With only three days left in the year, a lot of people are scrambling to spend down their Flexible Spending Accounts before the balance expires worthless. It’s a crazy system but those are the rules. Fortunately, if you can’t squeeze in any end-of-the-year dentist appointments or medical checkups, you can always spend them on eligible over-the-counter supplies you will likely need next year. I’ve put together a list of things I usually stock up on if I find myself with a few extra bucks.

In the past I’ve always bought a lot of my OTC products on Drugstore.com because they helpfully label which items are FSA-eligible, which takes a bit of the guesswork out, and because I won’t have to pay sales tax on my purchases. Amazon.com is a good place too but they don’t label FSA eligible products.

Last Minute FSA Ideas

• Contact lens solution
• First aid kits – When I’ve stocked up on everything else, I just buy some first aid kits to put in the car, my wife’s car, our kitchen, our upstairs closet…
• Band-aids, blister band-aids
• Motion/sea/car sickness pills
• Pain relief – Advil, Tylenol, Bayer, etc… you can’t have too much.
• Electric heating pads
• Thermometers
• Allergy medicine – Loratadine is always good to have, it’s the antihistamine in Claritin, at a fraction of the price.
• Healing lotions – They often smell like medicine but they’re good for you.
• Acid reflux drugs – I don’t use them often but when I need them, it’s awesome to have them handy.
• Smoking cessation products
• Braces, supports, ACE bandages
• Ice packs – for those sprained ankles
• Blood pressure monitor – instead of using the trusty arm wrap pump (I made up that name) and stethoscope, go 21st century!
• Defibrillator – This is for when you’ve grossly under-estimated your spending, by like a thousand dolllars or more, you can consider getting one of these. It’s for cases like where you planned on Lasik but then couldn’t get the procedure. These things usually last only a couple years too (pads last for around 2, battery for four, and you need to frequently test them), but they are lifesavers if you have a heart attack..

Good luck!

What’s the FSA loophole you ask? First, an FSA is a Flexible Spending Account and it’s an account where you can deposit funds pre-tax, they’re deducted from your paycheck. You can only use those funds to pay for qualified medical expenses. A qualified medical expenses can be anything from co-pays to prescription and over the counter medications. The only downside to the FSA is that you must spend all the funds within the plan year or they expire. Allocate too much and you find yourself wasting it on over the counter drugs you hadn’t planned on buying; allocate too little and you lose out on some of the tax benefits.

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When I first started working several years ago, I was amazed at the idea of a Flexible Spending Account (FSA). I could make tax-deductible contributions and they could be withdrawn tax free for qualified medical expenses and over the counter products. Since then, I’ve become aware of two other types of accounts: Health Savings Accounts (HSA) and Health Reimbursement Accounts (HRA). Each have their benefits and drawbacks and not every employer offers those program so it mostly depends on your luck. In the two employers I’ve had, I’ve only ever had access to the FSA. So, let’s talk about the differences between each of the programs.

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It’s December 18th, I have $131.81 in my Flexible Spending Account (FSA) and I have absolutely no idea what I’m going to spend it on. This is doubly difficult because last year I smashed a year of spending in three months (only $300) as I overfunded my FSA when I started my new job and I spent down my former job’s FSA, all in about the same two or three month period. So, what can I do? I took a look at the list of eligible FSA expenses and broke them down into a bunch of categories: Procedures, Nice To Have Items, Stock-up-able Items, and Useless (And Perhaps Funny). (I pulled the list from some page I found)

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Flexible Spending Accounts, or FSAs, are “use it or lose it” and, come June 30th, I’m going to lose what remains on my balance since my benefits plan refreshes every July 1st. I wrote something on FSA’s a little while back, called How Does a Flexible Spending Account Work, and now the time has come for me to apply it. We all have a set of expenses we believe are health related, well, the government has added a bunch of expenses you probably didn’t think you can use with an FSA. Additionally, reading this list is probably easier than reading this IRS document
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