Estimates say 16 million Americans make use of a benefit that’s offered by their employers, known as FSAs. These healthcare flexible-spending accounts allow workers to set aside pre-tax money, which can then be used for a variety of qualified expenses.
Most years, the money that accumulates in an FSA must be used by December 31, or the balance goes back down to zero. But Congress allowed employers to carry funds over from 2020 to 2021, and again from 2021 to 2022, due to the pandemic. As a result, FSA balances have grown larger. But those extensions have ended and that looming deadline serves as a reminder: now is the time to either use or lose those funds.
When a High Balance Isn’t Ideal
Most typically in finance, having a high balance in a savings account is a good thing. Yet, when it comes to FSAs and those pesky deadlines, a higher balance means a higher risk of forfeiture. That means money you worked for is left on the table.
Some employers will allow workers to carry over a portion of their FSA balance into 2023, but the maximum amount is $570, as set by the IRS. In 2019, prior to the pandemic, 44% of workers who had funds in an FSA account forfeited money. On average, $369 was lost – all of which goes directly back to your employer.
How Best To Spend
One important thing to keep in mind is the difference between FSAs and HSAs, or health-savings accounts. HSAs can be used for immediate healthcare expenses, but also function like long-term savings accounts and have no annual deadline.
So, what should you do with your FSA money before December 31? Basics like Band-Aids, pain relievers, tampons, and sunscreen are eligible purchases. So are some physical and talk therapies, hearing aids, contact-lens solution, and smart baby monitors. Even heating pads and DNA testing kits qualify. A comprehensive list of facts concerning FSAs can be found at healthcare.gov .
Chances are you’ll be able to find something eligible and useful — so long as you remember to look before the deadline.
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