Mrs. PT reminded me last night that we need to sit down and reconcile our medical spending to our flexible spending account reimbursements. This is a task we must do annually to ensure we’ve used all of our flexible spending account funds.
Our process is as follows: We need to review our current balance, get reimbursements for unclaimed expenses and, if needed, search for ways to use the remaining fund by the end of the year.
Use it or Lose it
As you know, most flexible spending accounts are “use it or lose it” type plans. You decided at the beginning of the year how much you’d like to contribute, tax-free, to your flexible spending account. Then, you spend the rest of the year dipping into that savings to try and spend it all.
If you don’t spend it all, not only to you miss out on the tax savings, but you lose your remaining funds. Not good! This is obviously the reason anyone talking about flexible spending accounts is going to advise you to be ultra conservative when estimating your spending.
Checking the Balance
Most employers use a third-party company to run the employee flexible spending account. My company uses PayFlex. They have a website where I can sign into my account and review my flexible spending account balance. If I’ve spent all of my flexible spending account funds, I can stop at this step. If not, I need to claim some more spending.
Find Unclaimed Expenses
Have you spent money on qualifying medical expenses this year and not applied for reimbursement for those funds? Well, now is the time to do it. Some companies will allow you to go past 12/31 to actually claim expenses for reimbursement, but you must have spent the money prior to 12/31.
I usually keep all my receipts from medical expenses in one spot. I’ll sort through those expenses and make sure they are claimed against my flexible spending account funds.
Tip: If you don’t have your receipts, you could just as easily do a search for those expenses using your online bank account. Or, you could connect your bank account to an online aggregator, like Mint. The aggregator will help you categorize your spending, making it easier to find unclaimed medical spending.
Look for Other Ways to Spend the FSA Funds
If you’ve exhausted your efforts to claim all your previous spending from this year and you still have a balance, it’s time to do some more spending. Luckily the rules are pretty lax when it comes to what constitutes qualifying medical spending. It doesn’t have to be doctor’s visits, treatments, or prescriptions. Check out some of these other qualifying expenses:
- Over-the-Counter (non-prescription) Medicines
- Medical Supplies (like band-aids)
- Eye Glasses and Contact Lenses
- Sunscreen
- A Flu Shot
- Products to Help Quit Smoking
Don’t let those funds go to waste. Get out there and spend it wisely. And keep this in mind when adjusting your next year’s contributions.
Can you list any other ways to spend your unused flexible spending account funds?
- Flexible Spending Account: Don’t Forget to Update it When You Have a Baby
- Save Money on Health Care: A Quick Summary of Tax Advantaged Medical Savings Accounts
- How Much Do You Contribute to Your Health Care Flexible Spending Account?
- Reached Your Contribution Limits? – Your Mid-Year Financial Check-Up #4
- How is Your Spending? – Your Mid-Year Financial Check-Up #1
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Most FSA plans now offer a 2.5 month grace period where you can incur expenses until March 15 of the following year. (i.e. March 15, 2010)
As a future consideration, please be aware that in the health care reform legislation that looks likely to pass, FSA contributions will be limited to $2,000 and will exclude over the counter drugs. This looks like it will go into effect in 2011.
Excellent contributions, calshana. I checked my own company’s rules and they have a grace period like the one you mentioned. Nice.
As for the FSA limitations resulting from the health care reform legislation, thanks for pointing it out. Help me understand why those are “reforms”… ??
I’m not a big fan of the “use it or lose it” mentality. I dont want to lose it. not even a little of it.
I got the most for my flexible spending money at Healthwarehouse.com, a mail order pharmacy that also has great prices on over the counter stuff like diabetic supplies. They have free shipping on everything, and also have 90 day supply of generic meds for $9.50 (shipped free). Looks like they are licensed in most states and have cold and flu meds as well. They give away 100 free orders per month, so it’s not only a bargain, there’s a chance I get a free order!
I’m signing up for the FSA at my work for the first time this year. We know we’re going to have quite a few expenses this year due to the fact that we’re having our first child – so why not get some tax benefit!
Sounds like the company running our plan has it so that you have to submit your expenses via fax, and then wait for a check reimbursement. Seems like an old fashioned way to do it, but oh well.
@Pete – We’ve found that we didn’t do out homework when it came to the cost of delivery and all. We ended up running out and spending quite an amount on over the counter meds, band aids, etc.
Be careful and set aside a place to keep all those receipts.