How to Spend FSA Funds
Do you still have funds in your flexible spending account? Generally, you’ll want to make sure that you spend them before December 31st of each year, but you do have some flexibility.
FSAs are offered by employers as a convenient way for employees to save money on qualifying expenses. The funds are set aside pre-tax but generally must be used by December 31st or they are returned back to the employer.
In 2020 and 2021, you can contribute up to $2,750 in healthcare-FSAs and up to $5,000 in dependent care accounts. As the name suggests, these are for medical expenses and there are certain qualifying expenses that can be covered by FSA funds. Dependent-care accounts are for childcare for kids under the age of 13 and other relatives who qualify and are claimed as a dependent on your taxes.
You might still have money to spend at the end of the year but thankfully, the IRS changed the rules in 2020 as a result of the COVID-19 pandemic. There is a much wider list of eligible expenses now and you can carry over $550, up from $500, into 2021. There is also a grace period of 2.5 months into 2021 to use the funds but that grace-period had to be confirmed by your employer.
Before you can spend your leftover funds, you should do some information gathering.
First, Understand What FSA You Have
Full-purpose healthcare FSAs allow most qualified medical expenses while limited purpose FSAs restrict allowed costs to vison and dental.
Once you know what kind of FSA you have, you need to know how much money is in your account. After you know what’s left, ask your employer if you have the 2.5 months into 2021. Review your Explanations of Benefits or other receipts that you may not have claimed.
It is important to note that you might have some unsubstantiated expenses and you will want to cover those first by getting documentation from your provider. It’s possible that you might get that amount dedicated from your pay to cover the costs.
When it comes to dependent-FSAs, you will need to spend all of those funds before December to make sure that the charges qualify but you may also submit 2020 claims for reimbursement until March 15, 2021.
What to Spend Your FSA Funds On
Cancellations due to COVID-19, may leave you with some extra FSA funds that you didn’t anticipate. If that’s the case, you can stock up on some over the counter medications, menstrual care products, visual-care products like contacts, contact solution, glasses; acupuncture, and more.
Here are a few more suggestions that can help you use up FSA money:
- Get a flu shot
- Upgrade some of your medical supplies like heating pads and thermometers
- Buy at home COVID-19 tests
- Get everyday first aid essentials like band aids and suncare products
- Get some high-tech health devices like wireless blood pressure monitors or a baby monitor.
Dependent-care FSAs are generally used for daycare expenses but they can also be used to cover day camps, elder care, work-related babysitting, and even some housekeeping or home care for a qualifying dependent.
Want more guidance on FSA funds as an employer or personal use? We can help! Contact MCK today!