Consumer IQ

The Best Ways to Max Out Your FSA Before the Year’s End

health savings

Flexible spending accounts, also known as FSAs, are popular benefits provided by employers that allow workers to set aside money to cover health-related expenses. Contributions are made to the account on a pre-tax basis, which can add up to a lot of savings. The problem is, any funds that aren’t used by the end of the year are forfeited.

As we near the end of the year, it’s wise to spend all of your FSA dollars — lest they disappear forever. From medical procedures to prescription drugs, these funds can be used to cover a variety of expenses, so find out what’s covered and don’t leave money sitting in your account.

Use it or lose it

With the ongoing changes in health care legislation, Flexible Spending Accounts now have a maximum contribution limit of $2,500 per calendar year.

While some legislators would eventually like to see consumers be allowed to rollover their funds to the next year, the “use it or lose it” rule still mandates that funds be used by year-end. So, whether you’ve got the max or just a few hundred bucks, there’s no point in letting your funds go to waste.

Natasha Rankin, Executive Director of the Employers Council on Flexible Compensation, says the first step is to educate yourself on which expenses are eligible for FSA use.

There are over 30,000 products and services that are can be used under the IRS tax code. Most of them are identified in Publication 502, Medical and Dental Expenses and include everything from birth control and breast pumps to eye surgery and fertility enhancement.

Rankin says the first thing you should do is go back over all your receipts for the year and start looking for qualified expenses. ”Look at your receipts from groceries and pharmacies. You might find a lot of things in there that you can get reimbursed for,” says Rankin.

Next, Rankin recommends making a list of any possible health issues or doctor visits that you need to schedule. This could include an annual trip to the dermatologist, a visit to a chiropractor to check on that aching knee, or a blood test to check your cholesterol and LDL levels.

If they’re things you may ordinarily do anyway, consider working in appointments before the end of the year so you can use your existing FSA funds. If you’re a diabetic or have ongoing medical needs, Rankin says you can also “stock up” on supplies, equipment or medication.

Melody Juge, Managing Director for Life Income Management, says if you’ve got a lot of money in your account, you could also use it for procedures or improvements you may have been considering.

A new set of dentures, laser eye surgery or anything you’ve been putting on the backburner could be a way to use the funds. Since FSA dollars can also be used for dependents, braces for your children could also be an option.

“Sometimes people try to put these things off because they’re careful with their money but if you’re going to lose it, now might be the time to do it,” says Juge.

Here are just a few of the options:

Birth control

All types of birth control are covered, including condoms, pills and intrauterine devices. FSA funds can even be put towards a vasectomy.

Visit the dentist

You can use your FSA funds to cover any co-pays you pay towards a dental visit. This includes cleanings, x-rays and fillings. FSA funds can also be used to get braces for your children, if needed. Dental braces can run up to $5,000, but you can use whatever is in your FSA and then fund the rest out-of-pocket.

Vision

If your glasses are getting worn down, you can use your FSA to buy a new pair of glasses or prescription sunglasses. Funds can also be used on non-prescription supplies, such as contact lens solution, cleaning devices, or on surgery to treat a defective vision, such as laser eye surgery or radial keratotomy.

Self-improvement

If you get a doctor’s order or recommendation, FSA funds can also be used to cover activities, programs, equipment or medications related to self-improvement.

If a doctor has ordered you to lose weight due to a specific disease diagnosis (such as hypertension, obesity or heart disease), you can include those related expenses, too.

While you cannot include membership dues for a gym or health club, you can include fees that are specific to weight loss activities. You may be able to use funds for the cost of special foods that exceed the costs of a normal diet.

You can also include medical expenses you pay for a program to stop smoking, but it does not include non-prescription aids like nicotine gum or patches.

Miscellaneous medical expenses

Juge says there’s a large grey area on what is eligible but they generally include anything that is supported by a written doctor’s recommendation. Capital expenses, such as constructing entrance ramps for your home or widening doorways, may even be covered.

Other eligible expenses include: lead-based paint removal, admission and transportation to medical conferences, hearing-impaired telephone equipment, travel expenses, a wig to cover hair loss, and expenses related to alcohol addiction treatment.

Craig Guillot is a business and personal finance writer from New Orleans. He covers insurance, investing, real estate, retirement and debt. His work has appeared in such publications and web sites as Entrepreneur, CNNMoney.com, CNBC.com, Bankrate.com and Investor’s Business Daily. He is the author of “Stuff About Money: No BS Financial Advice for Regular People.”