3 Medical FSA Considerations as You Approach Year End

With the end of 2020 nearing, you likely have many T’s to cross and I’s to dot — among them, determining how you’ll spend whatever balance remains in your medical flexible spending account (medical FSA). 

Review your FSA terms before year end

The maximum you could have accumulated in your FSA this year is $2,750 (that includes contributions from you and your employer). Assuming you’ve spent some of this already on qualified medical and dental expenses, you may have some portion of it still left to spend. If you don’t, the unused funds traditionally go back to your employer. However, there are two frequent exceptions to this rule:

• A carryover: The IRS permits employers to allow plan participants to carry over as much as $550 of their unused medical FSA balances at the end of a plan year. But this is up to your employer to determine, so you will need to find out if your FSA has a rollover.
• A grace period: Other employers/plans may offer a grace period of two months and fifteen days (most grace periods expire on March 15 of the new year), within which any funds remaining in your account from the previous year must be fully used.

Your employer can offer either a rollover or a grace period, but not both. And it’s not required to offer either one. 

You’ll also want to be aware of what’s called a “run-out period,” whereby you can submit receipts for reimbursement for up to 90 days after a plan year’s end. Most FSAs include run-out periods as a standard feature, but the duration varies. 

Consider pandemic relief efforts 

In March, the EBSA Disaster Relief Notice 2020-01 granted a temporary extension of run-out periods for FSAs and health reimbursement accounts (HRAs), giving you additional time after the COVID-19 National Emergency is declared over to submit your claims. These extensions are retroactive to deadlines occurring from March 1, 2020, until 60 days after the National Emergency is declared over. 

Strategize your spending 

If it is indeed “crunch time” and you need to spend your FSA dollars so you don’t lose them, consider what may be helpful for you to stock up on for the coming year — e.g., pain reliever, thermometers, cold and flu medicines, condoms, prenatal vitamins, first-aid kits, sunscreen or pill boxes. 

Many people also squeeze in an end-of-year visit to the eye doctor so they can use their money on contacts, prescription glasses or prescription sunglasses. Or you can use your FSA to pay for a visit to an acupuncturist or chiropractor. 

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