Millions of families across the nation will walk away from billions of dollars in flexible spending account savings by the year’s end, but there is still time to change that.
Every pay day, millions of workers wisely put tax-free money into flexible health spending accounts or FSA’s, but almost half of those workers later forfeit much of that money, the Employee Benefit Research Institute finds.
In some instances, it’s a sizable chunk of cash.
"Somewhere in the neighborhood of $370 [each],” Jake Spiegel with the Employee Benefit Research institute said.
That amounts to $3 billion total each year, and Spiegel said the money generally is no longer yours at that point. Where does it go?
"It typically goes back to your employer," Spiegel said.
FSA rules vary company to company, but some say employees must "use it or lose it" by Dec. 31, while other companies offer a little latitude.
Spiegel told NBC Bay Area Responds, “Some people have an FSA where there’s a grace period, where you have until March or so to spend down your balance.”
In addition, “Some FSA’s have a rollover feature, where you can roll over $500 or $600 dollars,” Spiegel said.
Consumers are advised to check with their company to find out what its practices are, including: What is your account deadline? What happens after December 31, and do the rules apply to your full FSA balance?
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Spending FSA money can be relatively easy as a lot of everyday items such as bandages, pain relievers and at-home COVID-19 testing kits are FSA-eligible.
But consumers should know a fair warning: The strategy can backfire if you’re not careful.
“Technically, what’s an allowable expense is what you could reasonably consume in a short amount of time,” Spiegel said. “So, if you were to buy an entire pallet of sunscreen, that might raise a flag or two at the IRS.”
Online stores have filters that will show “only FSA-eligible” items, and box stores may have “FSA-eligible” labels on the items’ shelves.
