by Stacy Francis, CFP®, CDFA
If you’ve been healthy this year, congratulations! But if you’ve spent less on medical expenses than you expected when you set up your flexible spending account, you may be scrambling to find ways to use the money before it disappears. Studies by benefits specialists regularly show that employees typically forfeit more than $100 each year in medical flexible spending accounts.
Flexible spending accounts offer employees a great way to reduce their taxable income while at the same time paying for medical or childcare expenses they know they’ll encounter during the year. Many companies let employees set aside $2,000 to $3,000 annually in pre-tax money to spend tax-free on medical expenses.
It’s a great deal, but the big catch is that you lose what you don’t use by the end of the plan year. But in late October, the Treasury Department announced a new $500 rollover option that companies can adopt voluntarily.
Savvy Ladies’ Tip: You can use the flexible spending account money for almost any health-related expense that isn’t covered by insurance, including:
Deductibles and co-payments, dental work and orthodontia, eyeglasses, prescription sunglasses, contact lenses and laser eye surgery, psychotherapy, psychiatry, psychology, drug and alcohol treatment, smoking cessation programs and prescriptions, medically necessary cosmetic surgery, massage therapy to treat an injury, physical therapy and speech therapy, out-of-pocket expenses for fertility treatments, chiropractic care, doctor-recommended weight-loss programs, hearing aids and batteries, medical equipment (such as wheelchairs, crutches or oxygen equipment), assistance for the disabled (including guides, Braille books, seeing-eye or hearing-trained animals, note takers, etc.), birth control pills/devices and procedures, acupuncture or related procedures to treat a medical condition, medically necessary prescriptions, vaccinations
Now you can also use flex funds for medications that don’t require a prescription, such as allergy and cold medications, antacids and pain relievers.