Don't lose your FSA money or regret it forever
- Participants of Flexible Spending Accounts (FSAs) need to spend their allocated funds by the end of the year to avoid forfeiting any remaining balance.
- Employers have the option to extend the spending period through grace periods or to allow rollover of funds to the following year.
- Understanding these options and eligible expenses is vital for participants to efficiently utilize their FSA funds before potential loss.
In the United States, many individuals participating in Flexible Spending Accounts (FSAs) face a pressing deadline as the end of the year approaches. Funds contributed to an FSA are typically intended for eligible medical expenses, such as copays for doctors' visits, dental treatments, or prescription medications. Notably, if these funds are not utilized by the end of the calendar year, participants risk losing their remaining balances. The traditional fiscal year for FSAs typically runs from January to December, motivating account holders to strategize their spending as the year draws to a close. However, variations exist depending on employer policies. Some FSAs include provisions for a two-and-a-half month grace period, allowing individuals to utilize their 2024 funds for qualified expenses through March 15, 2025. This flexibility means that account holders with a December 31 deadline might not need to rush their purchases, as they could extend their spending to a later date. Additionally, employers may opt to allow some portion of unused funds to roll over into the next year's account, although they cannot provide both a grace period and a rollover option simultaneously, as per IRS guidelines. The recent updates to FSA rules following the 2020 Coronavirus Aid, Relief, and Economic Security (CARES) Act have expanded the range of eligible expenses that participants can cover with their FSA funds. Previously limited to certain medical necessities, individuals now have the capability to use their accounts for over-the-counter medications, menstrual products, and a variety of health-related technologies. These items may require further documentation, such as a letter of medical necessity from a healthcare provider, to qualify for reimbursement. In light of these developments, it is crucial for FSA participants to thoroughly understand their benefits and deadlines. With the end of the year fast approaching, strategic planning is essential to avoid the common pitfall of leaving unspent funds. By reviewing their healthcare needs and the eligible products available, individuals can make informed decisions about their spending and ensure they maximize their use of the FSA money before the deadline lapses.