Tom Werner | Digitalvision | Getty Pictures
Because the calendar turns to a brand new yr, chances are you’ll be in danger for dropping cash if in case you have a flexible spending account.
Many FSA house owners have a Dec. 31 use-it-or-lose-it deadline to use the funds they’ve put aside for the yr.
The common forfeit of funds final yr from an FSA was $300, in line with Rachel Rouleau, chief compliance officer at FSA Retailer. In fact, some account holders misplaced even larger sums.
Versatile spending accounts are accounts which may be supplied alongside an employer well being plan and used to pay for eligible out-of-pocket medical prices. The cash contributed to an FSA shouldn’t be topic to federal earnings taxes.
In 2024, staff are capable of put up to $3,200 in an FSA, up from $3,050 in 2023.
Even for these account holders who might have needed to forfeit a number of hundred {dollars} on the finish of final yr, the tax benefits nonetheless make the accounts worthwhile, in line with Rouleau.
For instance, when you put aside $2,000 in your FSA and save 30% on taxes, that quantities to $600.
“Even if you lose $300, you still made the right decision,” Rouleau stated.
Ideally, each greenback put aside in an FSA ought to be used towards eligible health-care bills.
The excellent news is “there are thousands of ways for people to avoid losing those pre-tax dollars,” Rouleau stated.
In the event you’re not sure the place to begin, these three ideas may also help.
1. Discover out the principles in your unused FSA stability.
Your employer might not essentially require you to make use of your entire FSA funds by Dec. 31.
“It’s important for the employee, if they have an FSA, and they’re running up against the deadline to know, do they have to use it before the deadline runs out?” stated Lawrence Sprung, a licensed monetary planner and founding father of Mitlin Monetary in Hauppauge, New York.
You could have the choice to hold over unused funds into the following yr. As much as $610 could also be carried over into 2024, per IRS rules. Funds above that quantity could also be misplaced.
Alternatively, your FSA plan might provide a grace interval till March 15 to spend down your 2023 FSA funds.
Or you will have a runout interval, or a number of months after the tip of the final plan yr to submit receipts for certified bills that had been incurred in 2023.
To seek out out the precise guidelines that apply to your account, chances are you’ll contact your FSA administrator, which generally lists their contact data on an FSA debit card. Your human sources division may be capable of present that data.
2. Create a technique to make use of your stability.
Although time could also be working out, there are nonetheless loads of methods to make use of your FSA cash earlier than the Dec. 31 deadline.
When you’ve got a much bigger stability, chances are you’ll need to pursue larger ticket gadgets like eye exams, glasses and get in touch with lenses or dental work, steered Sprung, who can also be the writer of the e book “Financial Planning Made Personal.”
It is also a superb time to pay for any excellent medical payments that had been incurred in the course of the yr, Rouleau famous.
The funds can be used for routine care gadgets akin to over-the-counter medicines like ache relievers or allergy medicines, in addition to sunscreen, zits care and different routine care merchandise, she famous.
Purchases made on FSA Retailer’s web site up till midnight on Dec. 31 might qualify towards your 2023 stability.
3. Begin planning for subsequent yr’s FSA funds.
When working with households to plan for FSA spending, “the first year is the hardest,” Sprung stated.
When you’ve got not been protecting observe of your out-of-pocket medical bills, it may be powerful to gauge, he stated.
Sprung usually advises households to estimate how a lot they could spend, and maybe minimize that whole again a bit.
In following years, after you have FSA receipts or card transactions, that will make it simpler to estimate how a lot cash you and your loved ones might have, Sprung stated.
In the event you’re carrying an FSA stability into 2024, it might be an indication chances are you’ll need to contribute much less when it comes time to elect your deferrals subsequent yr, he stated.
“[If] you think that next year is going to be a similar year, then you certainly want to use that as a gauge and start cutting back,” Sprung stated.
Needless to say life adjustments, such because the beginning of kids or a divorce, may have an effect on how a lot it’s good to put aside in your FSA, he stated.
Importantly, versatile spending accounts are totally funded on the primary day of the plan yr. As such, chances are you’ll plan to begin utilizing subsequent yr’s funds earlier to keep away from working up towards subsequent yr’s December deadline.
Needless to say when you go away your job at any level in the course of the yr, both voluntarily or involuntarily, chances are you’ll lose entry to your stability, except you’re allowed COBRA continuation in your FSA, Sprung famous. Nevertheless, you should still have 60 to 90 days to submit receipts.
