Posted on Tuesday, December 19, 2023 by Kent Rausch
Make sure your employees aren’t leaving money on the table for their wellbeing by reminding them about year-end FSA spending account deadlines. We’ll help you demystify the FSA “use-it-or-lose it” policy and share some great ways to help your members make the most of their year-end healthcare spending.
As the year winds down, it’s time to tie up loose ends at work, wrap a few holiday gifts, and remind your employees to unwrap the full potential of their Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs).
Here are some tips you can share with your employees:
HSA and FSAs defined:
HSAs and FSAs are tax-advantaged accounts designed to help employees accumulate funds for qualified medical expenses. But the two types of accounts have different rules and purposes, especially at year-end.
- HSA – No Rush to Spend, Encouraged to Save
There’s generally no urgency to spend Health Savings Account (HSA) funds. In fact, one of the top benefits of an HSA is that the money you put into the account stays with you wherever you go and grows over time.
- FSA – Use it or lose it!
Flexible Spending Accounts (FSA) generally have a “use-it-or-lose-it” rule, meaning any money still in your account at year-end (or if you leave your job) is forfeited. Some plans may have a grace period or allow you to roll over a limited amount, determined the by IRS, into the next year, but in most cases you need to spend that money by year-end or it’ll be gone for good.
Approved Expenses for pre-tax health spending accounts
Here’s how you can spend your pre-tax consumer spending account dollars from your FSA:
- Deductibles and copays for health expenses including medical, mental health, prescription drug, dental, orthodontia, and vision care
- Prescription drugs
- Eyeglasses and contact lenses
- Certain first-aid and medical supplies
What about HSA funds?
HSAs can also help offset healthcare costs, from expected to unexpected. But HSAs are especially powerful vehicles for helping employees build a much-needed health expenses nest-egg for their retirement years. While HSAs can help offset larger costs in the near term, employees should be encouraged to treat their HSA similarly to a 401(k) or IRA investment account.
Check out our ebook on how to help your members take advantage of an HSA account.
Surprisingly eligible items to purchase with FSA funds
If you’ve taken care of your basic medical expenses described above and have money left in your HSA, that’s great! Keep it growing.
But if you have FSA money left, you’ll probably want to buy a few things to make sure you don’t leave any cash on the table!
Here are some FSA -eligible expenses that may surprise you. Be sure to check with your plan administrator, as some of these expenses may need to be prescribed for a specific medical condition to be eligible:
- Acne Treatment Products and Cleaners
- First Aid Supplies including bandages, first aid kits, and over-the-counter first aid creams
- Lactation Expenses including breast pumps and lactation consultants
- Massages or Massage Devices if prescribed to treat a specific medical condition
- Menstrual Care Products including tampons, pads, and menstrual cups
- Orthopedic Shoes if prescribed for a specific medical condition
- Over-the-Counter Medications like pain relievers, allergy medications, and cough syrup
- Prescription Sunglasses
- Smoking Cessation Aids like nicotine patches, gum, and lozenges
- Sunscreen with SPF 15 or higher
- Vision Supplies including contact lens solution and eye drops
- Wigs for chemotherapy patients
Investing in your health and wellbeing with a fully-stocked medicine cabinet and first aid kit is a great way to roll in to the new year. Don’t let your hard-earned money go to waste—be sure to spend those FSA funds by December 31!
Want a stress-free place to send your members to spend down their FSA accounts? Check out the FSA Store.