Last Update: Wednesday, July 23, 2014
|Deadline for Flexible Spending Accounts Weeks Away|
|Written by CANDICE CHOI, AP Personal Finance Writer|
|Thursday, 24 February 2011 02:49|
Don't give up on that money in your flexible spending account just yet.
The big downside of flexible spending accounts is that any unused money is lost at year's end. The good news is many participants can take advantage of a grace period that doesn't end until March 15.
One quick way to deplete your balance is to revisit the list of eligible expenses.
That could be a bit confusing this year, however, given some new rules that recently took effect.
Here's what you need to know:
DATES TO NOTE
The first matter of business is getting your dates straight. Don't confuse the grace period with the deadline for filing expenses.
A grace period is a window of time during which you can continue incurring eligible expenses. Under guidelines set by the Internal Revenue Service, this period can last up to 2 1/2 months after the end of the plan cycle. Because plans usually end Dec. 31, there's still a few weeks left in the grace period for most.
Not all plans offer grace periods, however, so be sure to check with your plan administrator.
Even if you don't have a grace period, you may still be able to salvage money remaining in your FSA. That's because the deadline to submit claims for any overlooked expenses in the past year usually isn't until three or four months after the plan ends. For most, that's March 31 or April 30.
In some cases, employers will distribute any money remaining back to workers at a normal tax rate.
More commonly, however, companies use it for administrative costs.
HOW TO SPEND IT
Before you start searching for ways to spend any remaining money, be sure you haven't overlooked any eligible expenses.
For example, you might not realize that mileage for medical appointments can be reimbursed. The rate isn't much, 16.5 cents a mile last year and 19 cents a mile this year, but it could add up depending on your situation.
Other eligible expenses that might surprise you include bandages, condoms and heat pads. Weight loss programs, humidifiers and other items also could be reimbursable with a doctor's note. To see a full list of eligible expenses, check www.savesmartspendhealthy.com.
If you plan on hitting the drugstore to zero out your funds, remember that expenses technically have to be for existing conditions. So if you try and stockpile 20 boxes of bandages, your plan could reject the claim. "There's a certain amount of honor that you're not purchasing cold remedy without needing it," said Jody Dietel, chief compliance officer at WageWorks.
If you still have money remaining, book appointments in the next few weeks for a checkup or preventive services such as mammograms and vaccinations. If all else fails, it may be time to finally make that dentist appointment.
The sweeping health care overhaul passed last year included an important change for FSAs: Prescriptions are now needed for over-the-counter medications.
The requirement applies to purchases made after Jan. 1, including medications, such as aspirin or Tylenol PM, you buy during the grace period using last year's funds.
The idea is to limit FSA spending and boost tax revenue to fund other aspects of the health care overhaul. You still don't need prescriptions for supplies such as canes and thermometers.
Another change could benefit new moms. Last week, the IRS said the cost of breast pumps will be considered an eligible expense effective immediately. That's important because the pumps and related equipment can cost several hundred dollars.
Whether you can get reimbursement for pumps purchased in 2010 or earlier this year is up to your employer, the IRS said.
Another change to note: The amount workers can contribute to FSAs will be capped at $2,500 in 2013. Right now, employers can set any cap but typically limit it to around $5,000.