If you have a Flexible Spending Account (FSA), you’re probably familiar with the dreaded “use it or lose it” rule. If unused by the end of the year, any money that remains in your account could be forfeited. So if you need to use up Flexible Spending Account money before the end of the year, what are your options?
“Employers have the option to allow employees who have flexible spending accounts to carry over up to $500 to the following year,” King says.
The new rule is effective immediately, but of course, employers aren’t required to allow that carryover.
Before we outline the options for spending a remaining balance, let’s look at what happens to your funds if they go unspent by the end of the year. The money could go back to your employer, who can generally only use the leftovers for FSA-related expenses, including administrative fees. But depending on your employer’s decisions, the leftover money may not be a total loss. They have a few options that could still benefit you:
- They can redistribute the leftovers equally into employers’ accounts.
- They can use it for a charitable donation (not a direct benefit, but you might feel warm and fuzzy)
- They can give you a “grace period,” extending your benefit period to March 15 of the following year.
- They can now allow you to carry over $500 into the following year (King says that you can’t have the grace period and the new $500 carryover option, however.)
None of these sound terribly appealing? Don’t think your employer will permit a rollover? Don’t worry — you still have options. There are plenty of ways to spend your FSA balance. Participants “may use funds to pay for doctor visits, prescriptions, lab work and hospital bills,” King says.
Need eyeglasses or contacts? Make an appointment for a vision exam. Need to refill a prescription? Call your doctor and get thee to a pharmacy. Back hurts? Consider an acupuncture or chiropractic visit, both of which can be paid for with FSA funds.
While over-the-counter drugs now need a prescription to be eligible, there are plenty of other FSA-eligible over-the-counter items that don’t require a prescription: bandages, breast pumps and reading glasses, for example. Purdue University has developed this handy database  of eligible and ineligible items.
Tell us — do you have a Flexible Spending Account? How do you handle the “use it or lose it” rule?
(Photo: flickr user Danzil Raines)