A Flexible Spending Account (FSA) is a popular way for individuals to pay certain out-of-pocket health care costs. The only catch is that FSA funds must be spent by a particular deadline. Otherwise, the money goes to waste.
Limits to FSA Funds
According to HealthCare.gov, “Individuals must use the money in an FSA within the plan year. But the employers may offer one of two options:
- They can provide a ‘grace period’ of up to 2 1/2 extra months to use the money in an FSA.
- They can allow an employee to carry over up to $500 per year to use in the following year.”
As an employer, you can offer either one of these two options, but not both. However, you’re not required to offer either one.
The bottom line is that December 31 is the deadline for most employees to incur an eligible expense. Others will have up to mid-March. Once the deadline hits, any money an employee still has in their FSA will be lost. It’s important to spend the money before it’s too late.
Putting the Money to Use
The key word in FSA is flexible. Employees can spend their money on a wide variety of health and medical-related purchases that best suit their needs. Here are some specific things they can spend their money on:
- Medical deductibles and/or co-payments
- Dental deductibles and/or co-payments
- Expenses incurred for hospital care
- Physicians’ fees
- Laboratory and clinical costs for services ordered by a physician
- Expenses incurred for ambulance services and other travel costs (include the use of a personal automobile) that are incurred for the purpose of obtaining necessary medical care
- Expenses incurred for medicines and other drugs that are prescribed for a specific medical purpose, including insulin and birth control pills
- Over-the-Counter medicines (available without a prescription) to treat injuries or sickness only
- The cost of wheelchairs
- The cost of crutches
- The cost of eyeglasses or contact lenses
As you can see, this list runs the gamut. Therefore, the chances are good that your employees will be able to use their FSA funds to improve their health and well-being. Just be sure that they are fully aware of the deadline.