The Procrastinator’s Guide to Health Care Flexible Saving Accounts (FSAs)
To all health care flexible spending account (FSA) procrastinators of the world, here’s your lecture, and I promise it will be short: procrastination is bad, and you should stop. While your FSA can save you a bundle on out-of-pocket medical expenses, in many cases you need to use all the money in your account by the end of the year or risk losing whatever you have left.
If you failed miserably at this last year, here’s the good news: you might still be able to use some of last year’s FSA money to pay for health care expenses in 2013.
What’s that? A reprieve? I know, I know—this is a textbook example of enabling the procrastinator, but I hate the idea of you burning a stack of your own money almost as much as you do. Even if the stack is tiny, like more of a bundle or wad, I still want you to get the most of what’s set aside.
Fortunately for you, dear procrastinator, you might be able to take advantage of some rules that will let you spend leftover 2012 money in 2013.
Here’s everything you need to know. (And if you need a review of exactly what a flexible spending account is, here’s a link that will fill you in.)
Figure Out the Rules for Your Account
First, you need to see how your company has set up your FSA. Different companies have different rules, so it’s important to know what you have to work with. And what you need to know is whether your FSA account has a run-out period or an annual grace period. Both give you a little extra time to claim FSA expenses from 2012; only FSA plans with grace periods let you apply 2012 FSA funds to 2013 expenses.
You can get this information by reviewing the Summary Plan Description you got in the mail (or that was made available to you online) when you first enrolled in your FSA plan, by checking with someone in your company’s human resources department or by contacting the company in charge of administering your FSA plan.
Want to Figure This Out Quickly?
Call the customer service number for the company that administers your FSA. If you were given an FSA debit card, that number should be printed on the back. Summary Plan Descriptions can be hard to find if you don’t know where to look, and HR—while always helpful—might not be around at midnight when you find yourself asking these sorts of questions.
The FSA administrator can also give you guidance on how your plan functions. If you have a consumer-directed health plan with a health savings account (HSA), for instance, your FSA and HSA money might be coming off the same account. Also, your plan might require you to save and submit receipts for reimbursement instead of letting you use a debit card.
Run-Out Periods vs. Annual Grace Periods
If your plan has a run-out period, your options for claiming leftover 2012 funds are fairly limited. Run-out periods let you claim expenses you made before December 31, 2012, but only if you’re able to provide the appropriate documentation. You might not be able to claim much, but if you didn’t get an Explanation of Benefits form from your insurance carrier before the end of the year—or if you have unfiled receipts lying around for eligible expenses like copayments, prescriptions or supplies—you can reimburse yourself with money from your 2012 FSA account.
Annual grace periods, on the other hand, are a little more forgiving. If your company has structured your FSA with an annual grace period, you’ll have some extra time in 2013 to spend your 2012 money. The nice folks who make your FSA possible (the Internal Revenue Service) permit a grace period of two months and 15 days, which means you have until March 15th to get the most out of your leftover 2012 funds. Of course, with a run-out period on top of a grace period, you could have even longer. You’ll still have to make your purchases during the grace period, but some FSAs let you submit claims for reimbursement beyond March 15th. Again, you’ll want to check your plan to get the exact dates.
Still with me? Good, because now I’ll show you the different ways you can use your leftover FSA money.
Health Care Providers
Yes, of course you can use your FSA money to cover the cost of visiting your doctor. You were planning on seeing her anyway, so make sure to schedule your next appointment before your grace period runs out. Even if you’re covered by insurance, you can use money from your FSA account to cover the insurance copayment.
You can also use FSA money to pay for the other provider services you usually get. Finalize that eye exam you’ve been meaning to put on the calendar (and get some new glasses while you’re there—lenses and frames are eligible expenses) or arrange to have your teeth cleaned in early March instead of April.
Other health issues? Don’t overlook your chiropractor, acupuncturist or hypnotist. You might need a letter of medical necessity from your primary care physician to prove that the services you want are medically necessary, but these things are considered FSA-eligible under the right circumstances.
Okay, now this part is tricky. Over-the-counter (OTC) drugs are FSA-eligible expenses, but to take advantage of any tax savings, you must have a doctor’s prescription for whatever you buy. Yes, it’s a huge pain in the buns, but the rules for OTC drugs changed in January 2011, and that means you’re no longer allowed to easily use FSA funds to purchase OTC cold medicine or pain relievers.
If you’re planning to see or talk to your doctor some time before the end of your company’s annual grace period, though, you could ask her to write you a prescription for the OTC drugs you use most. As long as the prescription seems reasonable (two or three items, not 200 boxes of possible meth ingredients), she should be willing to help you save a few bucks.
Also, if you’re especially pressed for time, you might be able to skip the office visit altogether. Your doctor might be willing to call in an OTC prescription to your local pharmacy for you. If she does, your drug store receipt will have a prescription number on it, and your purchase will become FSA-eligible. All you have to do is ask.
Now we’re talking. Unlike OTC drugs, you don’t need a doctor’s prescription to use FSA funds to purchase OTC medical supplies, which makes the whole process of using leftover 2012 money a lot easier.
What are OTC “supplies”? Well, the answer to that might vary depending on whom you work for. Different employers have different rules, so it’s always best to check ahead of time. In general, though, eligible OTC supplies include things like bandages, breastfeeding supplies, contact lens supplies (cleaning solutions, storage cases, etc.), vaporizers and humidifiers, and home diagnostic equipment like pregnancy tests, thermometers or blood pressure gauges.
If you’ve got a bum elbow or something along those lines, the ability to buy OTC supplies without a prescription lets you pick up the things you need anyway without much hassle from The Man. Just be careful and double-check whether your purchases are FSA eligible. For instance, you might breathe easier with a high quality air filter, but that doesn’t necessarily mean you’re allowed to use FSA money to get it.
Don’t Overdo It Next Time, Okay?
The first rule for getting the most out of your FSA is to use all your money for the plan year. If you’ve got money left over from last year, you set aside too much. Be sure to reassess your contributions the next time you your company lets you change your benefits. If you don’t think you’re going to need as much next time, reduce your contributions, and if you expect to have more expenses (like a surgery or the arrival of a new family member), maybe an increase is the way to go.
Despite the fact that there are more than 32,000 over-the-counter health care items and health care services you can pay for with tax-free FSA money, you don’t want to find yourself scrambling at the end of every year.
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