How to Make the Most of Your Flexible Spending Account Before December 31st | Allworth Financial

What Is an FSA?

An FSA is an employer-sponsored benefit that allows you to set aside pre-tax dollars for qualified medical, dental, and vision expenses. FSAs can lower your taxable income and help you cover out-of-pocket healthcare costs. However, these accounts often come with strict rules about how and when the funds must be used.

Key Deadlines to Keep in Mind

For most FSAs, December 31 is the deadline to spend your contributions. However, some employers offer extensions or grace periods:

• Grace Period: If your plan includes a grace period, you may have until March 15 of the following year to use your funds.
• Carryover Option: Some plans allow you to carry over up to $610 (for 2024) into the next plan year. Check with your employer to see if this option applies to your account.

Understanding your plan’s specific rules is essential to make sure you don’t lose any unspent funds.

What Expenses Are Eligible?

FSA funds can be used for a wide range of healthcare expenses. These include, but aren’t limited to:

• Medical Expenses: Co-pays, deductibles, and prescriptions
• Dental Expenses: Cleanings, fillings, and orthodontics
• Vision Care: Eyeglasses, contact lenses, and eye exams
• Over-the-Counter Products: Items like pain relievers, allergy medications, and first-aid supplies
• Other Eligible Costs: Menstrual products, sunscreen (SPF 15 or higher), and some travel expenses related to medical care

To maximize your savings, consider purchasing items you’ll use throughout the year, such as a supply of contact lenses or over-the-counter medications.

How to Use Your Remaining Funds

If you have a balance in your FSA and no upcoming medical appointments, there are still ways to use your funds before the deadline:

1. Schedule Preventive Care Appointments: Annual physicals, dental cleanings, and eye exams are great ways to use FSA funds and prioritize your health.
2. Stock Up on Essentials: Visit an FSA-eligible store or website to purchase items like first-aid kits, thermometers, and sunscreen.
3. Plan for Upcoming Needs: If you anticipate future medical needs, such as getting new prescription glasses or starting orthodontic work, use your FSA funds now to potentially pre-pay for those expenses.
4. Submit Reimbursement Requests: Don’t forget to submit claims for any eligible expenses you’ve already incurred. Keep an eye on reimbursement deadlines, which may extend beyond December 31.

What Happens if You Don’t Use All Your FSA Funds?

Unused FSA funds are typically forfeited and returned to your employer. This is why it’s so important to plan ahead and use your funds strategically. If your employer offers a carryover or grace period, you’ll have more flexibility, but it’s still a good idea to minimize the amount you leave unspent.

Tips for Better FSA Planning in the Future

Avoiding the year-end rush to use your FSA funds requires thoughtful planning throughout the year. Here are some tips to help you maximize your account:

1. Estimate Your Expenses Carefully: When enrolling in an FSA, review your past medical expenses to estimate how much you’re likely to spend in the coming year. This can help you avoid over-contributing.
2. Track Your Spending: Regularly monitor your FSA balance and expenses to ensure you’re on track to use all your funds by year’s end.
3. Plan for Big Expenses: If you know you’ll have significant healthcare costs, like a surgery or orthodontic work, time these expenses to align with your FSA contributions.
4. Leverage Employer Resources: Many employers provide tools and resources to help you manage your FSA. Take advantage of these to stay informed about eligible expenses and deadlines.

FSAs vs. HSAs: What’s the Difference?

If you’re deciding whether to enroll in an FSA or a Health Savings Account (HSA) for the next year, it’s helpful to understand their differences:

• FSA: Funds must generally be used within the plan year, though some plans offer grace periods or carryovers. FSAs are only available through an employer.
• HSA: HSAs allow funds to roll over indefinitely, and they are available to individuals with high-deductible health plans. Contributions to an HSA remain yours even if you change employers.

Both accounts offer tax advantages, but an HSA provides more flexibility in terms of fund usage and long-term savings.

Don’t Let Your FSA Go to Waste

With the December 31 deadline fast approaching, now is the time to review your FSA balance and make a plan to use any remaining funds. Whether it’s scheduling a doctor’s visit, stocking up on medical supplies, or submitting reimbursement claims, there are plenty of ways to ensure your hard-earned money doesn’t go to waste.

If you have questions about FSAs or aren’t sure how to make the most of your remaining funds, your Allworth advisor is here to help. They can walk you through your options and provide guidance to make sure you’re set up for success in the coming year.