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Workers who use health-care flexible spending accounts likely have at least one important deadline approaching.
FSAs, as they’re called, let you stash away pre-tax money to cover your health-care expenses (or, separately, dependent-care expenses). Last year, individuals could have contributed as much as $2,850 to their health-care FSA. The limit for 2023 is $3,050.
Yet most companies have a “use it or lose it” policy — meaning that if you have a balance remaining on Dec. 31, you’ll end up forfeiting that money if your health-care expenses during the year were lower than your contributions.
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However, you might still have options for using your 2022 FSA balance, depending on your employer’s rules.
Here’s what to know.
You may still have time to submit 2022 expenses
If you have proof of 2022 expenses that qualify but you haven’t yet submitted them for reimbursement, most employers give you extra time to do so — a so-called “run-out” period.
“It’s optional, but almost all employers offer it,” said Lisa Myers, director of client services and benefits accounts for consultant Willis Towers Watson. “It just gives [workers] extra time to get reimbursed for expenses incurred last year.”
The most common deadline for this is March 31, she said, although some companies may give you six or 10 months.
Be aware that any documentation you submit to substantiate your claim must include five key things, Myers said: date of service, patient name, the provider’s name (i.e., your doctor or dentist), the type of service and the amount. Otherwise, the claim may get kicked back to you.
Some offer a grace period or carryover amount
Meanwhile, some employers also provide a grace period to spend any remaining 2022 FSA money — meaning qualifying 2023 health-care expenses also can be applied against last year’s balance. This period typically ends March 15.
“You can think of it as a two and half-month extension of your 2022 plan,” Myers said.
And other companies allow you to carry over up to a certain amount from the previous year. For 2022 carryovers to 2023, that limit is $570 — although your company may have a lower cap.
Among workers who are allowed to carry over money, 49% end up forfeiting all or part of it, according to the Employee Benefit Research Institute. For those with a grace period, that share is 37%. Additionally, 48% with a traditional Dec. 31 deadline forfeit money, as well.
Check with your employer about its FSA rules
It’s common for workers to not know what their employer’s FSA rules are. If you’re uncertain, reach out to your company’s human resources department.
Alternatively, you can check your online FSA portal (if your company has one) for information. There also should be a phone number for customer service on the back of your FSA debit card that you can call.
The list of FSA-eligible items is lengthy
If you discover you’ve only got until March 15 to spend down remaining 2022 funds and are unsure how to use the money, there’s a broad range of services and products that qualify.
“Most people are surprised to learn everything that’s eligible,” said Rachel Rouleau, chief compliance officer for Health-E Commerce, parent company of FSAstore.com.
For starters, over-the-counter drugs don’t need a prescription to qualify. This includes things such as cold medicines, anti-inflammatories and allergy medicine.
Most people are surprised to learn everything that’s eligible.
Rachel Rouleau
Chief compliance officer for Health-E Commerce
Additionally, menstrual care products are eligible, as are items that became pertinent during the pandemic, such as at-home Covid tests, masks, hand sanitizer and other personal protection equipment used to combat the virus.
Other products that qualify include sunscreen, thermometers, eye-care products, baby monitors and pregnancy tests. FSAstore.com has a list of eligible items if you are uncertain whether something would qualify.
Be aware that the IRS does not allow stockpiling, which generally means you can’t buy more of a product at one time than you can use in that tax year. The specifics, though, are determined by FSA administrators.
