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8 ways to use medical FSA money by Dec. 31

FSA sign in optometrist office window_photo by Kay Bell
My neighborhood optometrist is encouraging medical flexible spending account (FSA) owners to stop by and spend that money before the end of the year. (Photo by Kay Bell)

You just discovered that you have money in your medical flexible spending account (FSA).

For folks who don't have an FSA, this is a workplace benefit that allows you to put money into the account as an automatic withdrawal from your paychecks. In 2020, you could put up to $2,750 into your FSA. Since inflation has been low, that amount stays the same in 2021.

You then use FSA funds to pay for allowable medical expenses that aren't covered by your insurance or that are part of the deductible you must meet before your coverage starts paying.

The best part is the FSA contributions are made before your pay's taxes are calculated, meaning the account saves you some out-of-pocket cash and taxes.

Use it or lose it: But there's one big drawback to a medical FSA.

In many cases, if you don't spend all your account's money by the end of your employer-provided benefits year, which is Dec. 31 for most of us, then you lose the money. Your boss gets to keep it.

Yes, some employers let FSA owners roll over up to $500 in unused funds into the next benefits year. Others give workers a grace period until mid-March to use the funds.

But those are voluntary, not required, FSA extension options. If your company doesn't allow either — and they are either/or; a business can't offer both — then you need to spend your FSA funds. Soon.

If you're in the use-it-or-lose-it category, don't panic. You still have time spend those tax-deferred medical dollars.

Here are eight ways to use up those FSA by year's end.

1. Load up on over-the-counter medications: Millions have benefited from the Affordable Care Act (ACA), still popularly known as Obamacare. But some paid a price for its implementation. When the ACA was being developed, lawmakers looked for creative ways to help pay for it. One option was to limit what was covered by medical spending accounts. The option to buy over-the-counter medications with FSA money changed in 2011, requiring a doctor's prescription before the pre-tax account money could be used. That Rx condition was in effect until this year. Now OTC meds are back when it comes to FSAs. The Coronavirus Aid, Relief and Economic Security (CARES) Act that took effect in late March says that you can once again use the tax-free medical account money to cover OTC treatment costs without having to first consult your doctor.

2. Invest in diagnostic items: With COVID-19, we're all little more amped up about our overall health. Rather than spend time perusing online medical sites, buy an FSA-eligible product that give you a more personal and accurate assessment of your well-being. This includes items such as at-home coronavirus test kits, blood pressure monitors, thermometers and pulse oximeters.

3. Upgrade your air quality: The coronavirus' airborne transmission also has made us all much more aware of the air around us. While the myriad products to clear and clean our indoor air are not strictly medical devices, in some medically-prescribed instances you may be able to use FSA funds to buy them. Air conditioners, air purifiers and air filters can be FSA-eligible if your doctor recommends them for treatment of a medical condition.

4. Buy baby products: For many people, 2020 wasn't all bad. They welcomed a baby into their families. They also welcomed lots of new costs. Your FSA can help here. Baby monitors, diapers and potty-training garments and baby thermometers are among items that generally qualify for FSA reimbursement. So do items for the new mothers, like breast pumps and nursing supplies. And for all women of child-bearing age, the CARES Act provision that reinstated OTC FSA products also expanded that category to cover menstrual products.

5. Pick up a first aid kit: Since we've been self-isolating in our residences, many of us have come to more fully understand that old saying that most accidents happen at home. So that you can take care of those minor scrapes, use your FSA funds to purchase a well-stocked first aid kit.

First aid kit

6. Take care of tooth trouble: Dental procedures are a common use of FSA money. This includes co-pays or out-of-pocket expenses associated with everything from basic cleanings to common procedures like filings and crowns to more elaborate dental work such as root canals and gum surgery. Your youngster's orthodontic needs also are covered here. Yeah, a visit to the dentist, be it you or a kiddo, is not a fun way to wrap up a year, but it's a good way to take care of your teeth and use up your FSA funds.

7. Examine eye care options: Basic vision needs generally aren't covered by workplace medical plans, but FSA funds can fill this gap. You can use the account money to buy prescription contacts, eyeglasses or even sunglasses. Note, however, the prescription requirement. You can't just pick up a pair of cheap off-the-drugstore-display shades to look as cool as ZZ Top. You also can use FSA money to pay for equipment and materials required in connection with your contacts that help you get a 20-20 view, such as saline solution and enzyme cleaner.

8. Explore alternative treatments: Doctors are literal lifesavers in many cases. A lot of folks, however, prefer alternative treatments, such as acupuncture. This, as well as other alternatives like chiropractic services, are FSA eligible as long as they are for the specific treatment, cure, diagnosis, mitigation or prevention of a disease or illness. To verify that the ancient needle work or musculoskeletal manipulation meets that requirement, your FSA administrator might require a Letter of Medical Necessity (LMN) from a healthcare provider detailing the reasons for the out-of-the-box treatment. If you're relying on your FSA money for these, speak with your benefits administrator before scheduling to ensure the coverage.

In fact, if you have any questions about whether any item or medical service is FSA covered, check with your benefits office first.

You also can get even more options at the FSA Store's online list of what generally is (and isn't) covered.

Here's wishing you successful FSA shopping and a Happy and Healthy New Year!

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