BALANCE CHECK ON FLEXIBLE SPENDING ACCOUNT BENEFITS
It’s that time of year. Have you checked the balance in your Flexible Spending Accounts (FSAs)? This pretax medical deduction can help you to spend less on your health care while experiencing the maximum tax benefit. There is a catch-you must use monies within the current calendar year to reap the rewards. By spending all of the money in your account before the year-end deadline, you ensure you are getting the most bang for your buck.
FSAs are pre-tax monies that are placed in an account and are available for use only on approved medical expenses. They differ from a health savings account, HSA, in that the money contributed can only be used for that calendar year. In other words the FSA accounts are use it or lose it. As the year quickly draws to a close the question becomes, have you used it? Being proactive in checking your balance allows you time to react before the year ends.
In October 2016, the IRS released its inflation adjustments which raised the limits for healthcare FSAs. In 2017, the annual FSA contribution limit is increasing by $50 from the previous year. Employees with this employer-sponsored benefit account can contribute a maximum of $2,600. While there are no exceptions that allow that money to be directly paid back to you, there are more options than you might expect as to how to spend the extra money. If you have monitored the amount spent during the year, you have an idea what is left to spend down as December quickly approaches.
There are two cases where you can get a little extra time to spend that money.
- A rollover option. This allows you to move up to $500 to next year’s balance.
- Grace period. Because most plans fall on the calendar year, this option allows you to use the moneys for up to 2 ½ months past the end of the year. Why is this? Because, during the first few months of the year your account has accrued little funds.
Most FSA accounts come with a debit card and usually have one or the other of these two options but CANNOT have both. However, if you are required to submit a claim, be sure to watch the claim windows in which you can ask for reimbursement.
How to spend FSA accounts?
If you have a high balance left in your account, don’t despair. The list of things that you can spend the money on however is pretty large, leaving many surprised what they can purchase using their FSA account. To get a full listing of what you’re allowed to spend FSA money on, visit an online FSA store. These stores only sell items that qualify approved purchases using your FSA account.
Some out-of-the ordinary expenses you can pay for using your FSA account also include:
- Eye Exams, Eyewear and Contact Lenses
- Chiropractor visits
- Artificial teeth or limbs
- Qualified service animals, such as a guide dog, including food and grooming costs
- Travel that was required for medical treatment.
You may also use the FSA for expenses such as hearing, vision, and dental services even if you don’t have insurance for those services.
Keep track of your FSA account throughout the year. Spending in moderation throughout the year will also help to reduce the scramble to use money that you have left as the year comes to an end. Despite the hassle of having to make sure all the money is spent, FSA accounts are a good way to avoid paying taxes on money that is used for medical expenses.
About the author: John D. Bissell, owner of Bissell Eye Care and Tri-State Low Vision Services, offers comprehensive eye examinations for the entire family, ocular disease detection and treatment, eye glasses, sun glasses, active wear, contact lenses, and low vision examinations for those with significant vision loss. He has undergone specialized training for treatment of low vision by the International Academy of Low Vision Specialists utilizing customized telescopic eyeglasses, prisms and telescopic implants for patients who qualify. The practice accepts most types of vision and health insurance plans.