With 2020 winding down, chances are your year-end to-do list is already chock full of chores, from winterizing your car to purchasing holiday gifts for the family. If you haven’t already, you’ll want to consider adding one more item — checking the balance on your Flexible Savings Account (FSA). That’s because, with a few exceptions, FSA funds expire at the end of the year, meaning you have to use them or lose them.
Part of an employer-provided insurance plan, FSAs allow you to put pre-tax dollars aside ($2,750 for 2020) to pay for out-of-pocket medical expenses. If you make $50,000 a year, and you put $2,000 a year in an FSA, you would pay taxes on only $48,000 of your income, explains Milton Rodriguez, a certified financial planner with Pacific Pier Tax Management.
“You get the money to use for medical expenses, without ever having to say, ‘Hey, IRS, I made this money. Let me go ahead and pay taxes on it and then pay my medical expenses,’” he says.
While prescriptions, deductibles, and copays are the most obvious methods to use up your extra funds, there are a number of creative ways to spend that money that you may not have thought of. Here are a few to consider before saying goodbye to 2020 — and your FSA dollars, forever.
1. Check in on your mental health
The winter months can be especially trying on a person’s mental health — with conditions like seasonal affective disorder setting in as the days get shorter and the nights get longer. And, unfortunately for those in need of counseling or treatment, some mental health professionals don’t accept insurance (or accept a very limited number of plans), opting for out-of-pocket payments instead. Leftover FSA funds can be a good way to pay for services like therapy, says Rodriguez, or even something like an addiction treatment program.
2. Keep an eye on your eyes
This is a great chance to schedule an eye exam to make sure your eyes are healthy and to see if your prescription has changed. Consider getting new or extra contact lenses and cleaning solution, reading glasses, and prescription sunglasses so you’re never left squinting again.
3. Restock your medicine cabinet
Running low on bandages, antiseptic, or aspirin? Your FSA funds can help you restock on those drug store necessities. (And why not stash an extra first aid kit in your car, while you’re at it?) With the double threat of flu season and COVID-19, it’s also a good time to make sure you have a digital thermometer handy, too, says financial expert Shannah Compton Game. The CARES Act to respond to COVID-19 allows you to use FSA funds on certain over-the-counter medications, including aspirin and other painkillers, allergy medications, cough medicine, and others, without a prescription. That law also allows you to now spend FSA funds on feminine care products, too.
4. Prioritize parenthood (Or not...)
If you’ve been thinking about having a baby or are currently trying to get pregnant, use your FSA to purchase prenatal necessities, such as ovulation predictor tests, prenatal vitamins, or pregnancy tests, advises Compton Game. If you’re already expecting or have a new baby, almost all breast-feeding supplies — breast pumps, nipple shields, nursing bras — may be covered, along with diaper cream. You may also be able to use FSA funds for infertility treatments or a midwife. On the flip side, FSA funds may be used for birth control or a vasectomy, too.
5. Get ready for summer
If you’re the type who really likes to plan ahead, consider using your dollars to get a leg up on the warm weather months. Sunscreen (check to see if you need a minimum SPF) and bug-bite treatments are often covered under an FSA.
Now, if you’re unsure whether a particular expense or item is FSA-eligible, there are a number of online databases and resources you can check out before heading to the drug store. Insurance companies provide these lists, and major drug store chains also typically list the FSA-eligible products they carry. Your FSA provider should also have a list specific to your plan.
No matter how you spend those extra FSA funds, be sure to keep your receipts, says Compton Game.
If you find you’re still struggling to spend your 2020 funds, don’t forget to investigate your plan’s rollover policies. Some providers will allow you to roll over up to $500 of your FSA into the new year, without affecting that next year’s fund. Other plans may let you roll over the entire balance to use within the first 2 ½ months of a new year.
“It really is going to be plan-specific,” says Rodriguez. “That's when you want to contact your benefits specialist or HR.”
