7 ways to empty flexible spending accounts
Spending conservatively during the holidays is a good idea, except when it comes to your flexible spending account.
Consumers with a flexible spending account, or FSA, may have just days left to use funds in these pretax accounts -- or lose them for good.
These accounts let you put aside pretax dollars for payment of out-of-pocket medical expenses. But the funds don't usually carry over year to year, so come Dec. 31, you could forfeit any unspent funds. (You may have as late as March 31, 2010, to submit expenses for reimbursement, depending on the plan.)
"Having $200 to $300 left at this point is not uncommon," says Tom Billet, a senior benefits consultant at Watson Wyatt, an employee-benefits consulting firm. "Then, panic sets in."
Before you purchase a lifetime supply of over-the-counter medication, see if there's actually a need to panic. Some employers allow you to submit expenses incurred as late as March 15 of the following year. You may also be able to roll over unused funds if you have switched to a health care plan offering a health savings account, or HSA.
No luck? It's time to burn through your cash. There are plenty of expenses that qualify for those pretax dollars, says Michelle Connor, a senior benefits consultant with employee-benefits consulting firm CBIZ. IRS Publication 502 (.pdf file) lists eligible medical expenses, but ultimately it's up to the FSA administrator (usually, your insurer) to interpret guidelines, she says. Check its site for a detailed list.
Assuming a last-minute doctor's visit is out of the question, try these seven tactics to spend down your FSA:
Hunt for receipts. Before you spend another dime, make sure you've been reimbursed for all qualifying medical expenses already made this year, says Derek Fitteron, the chief executive for Medical Cost Advocate, a consumer billing advocate. Check your insurer's Web site for a list of claims, review your order history at Drugstore.com and other online drugstores, and ask your pharmacist for a printout of your prescription history.
Claim mileage reimbursement. The IRS allows FSA reimbursement for miles driven and parking fees and tolls incurred in your quest for medical care. Tally up miles driven to and from each doctor's visit this year, says Bryan Link, the chief executive of online financial management tool SimpliFi. The reimbursement rate for 2009 is 24 cents per mile. Usually, all that your FSA administrator needs as proof is a list of dates and a printout of driving directions (say, via MapQuest) for per-trip mileage, he says.
- Could you pass a driver's test?
Prepay medical expenses. Medical care paid for in 2009 but received in 2010 is typically reimbursable, says Carrie McCampbell, a consumer specialist with eHealthInsurance.com. While you're unlikely to find a doctor willing to let you pay for July's wisdom tooth surgery today, you may be able to make an extra payment toward an ongoing expense like orthodontics, or charge a three-month supply of a regular prescription through a mail-order company.
Prepare for cold and flu season. January and February have been the peak months for seasonal influenza activity in 17 of the last 26 flu seasons, according to the Centers for Disease Control and Prevention. Consider readying a stock of over-the-counter remedies, including cough drops, suggests Elena Wu, an employee benefits expert from Guardian. They’re all qualified expenses.
More interested in warding off winter illness in the first place? A few administrators, including Cigna, consider hand sanitizer as another reimbursable purchase.
Get ready for vacation. Many administrators offer reimbursement for sunscreen, although the requirements vary. Aetna and WageWorks reimburse for varieties with an SPF of 30 or higher; Deseret Mutual requires a doctor's note diagnosing you with a skin disease requiring sunscreen. Sunburn remedies such as aloe vera gel are reimbursable, too.
Beef up your first aid kit. Premade kits are reimbursable, as are the components to make one of your own, says Connor. Replenish your stock of bandages, first aid cream, gauze and antiseptic, among other items.
Stock up on vision wear. Contact lenses and glasses are ideal FSA spend-down tools because there's no need for another doctor's appointment as long as your prescription is up-to-date, says Mitch Franklin, an assistant professor of accounting for the Whitman School of Management at Syracuse University. Contact lens solution and cases also qualify. There's little risk on stocking up for this prescription, either -- sites like 1800Contacts.com typically exchange unopened boxes of contacts at no cost to you if your prescription changes.
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