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7 ways to spend your end-of-year FSA funds

Woman shopping for OTC medicine_FSAStore infographic_650px

Here in Central Texas, we're experiencing a mild December. We finally got a light freeze in outlying areas last night, but temperatures in the immediate Austin area are expected, at least for a couple of days this week, to climb into the mid-to-upper-80s.

Gerber Daisies in December 2021_1000px1Human residents aren't the only ones enjoying the moderate spell. Plants are taking advantage of the warmth, too, like the Gerber daisy trio to the left that decided to make an appearance on our backyard patio.

While the late-year flowers are lovely to look at, accompanying pollen is wreaking havoc with my allergies. I am not alone. When I went to the grocery store, the busiest aisle was the one stocked with over-the-counter (OTC) antihistamines.

The good news for the sniffling shoppers who have medical flexible spending accounts (FSAs) is that they can use those tax-favored funds to pay for their OTC meds without the added hassle of going to the doctor.

This option is especially welcomed by the FSA owners who must spend the tax-free dollars by the end of their workplace health care plan's benefits year or lose the money. That's Dec. 31 for most.

Stocking up on OTC allergy and other common medications is one really easy way to zero out any FSA balance. It tops the following list of seven ways to spend down your medical spending account.

1. Let OTC meds put you over the FSA top. The Coronavirus Aid, Relief, and Economic Security, or CARES, Act that was enacted in March 2020 reversed the Affordable Care Act (ACT, or Obamacare to many) requirement of a physician's prescription for OTC treatments in order for them to qualify for FSA reimbursement.

The CARES change also applies to health savings accounts (HSAs) and health reimbursement arrangements (HRAs), which also are funded by beneficiaries' pre-tax dollar contributions.

2. Pick up some personal hygiene items. In addition, the CARES Act allows for FSA, HSA and HRA money to be spent on common personal hygiene products that also are available on store and pharmacy shelves. In fact, the CARES law specifically noted that FSA etc.-eligible OTC items include tampons, pads, liners, cups, sponges, or similar products used by consumers with respect to menstruation. Since it's silly to demand a doctor's script for a naturally occurring biology reality, the law did away with that provision. And technically, it was this legislative act of making OTC menstrual products spending account eligible without doctor involvement that erased the entire ACA OTC prescription requirement. You're welcome, say all the women in your lives.

3. Consider COVID-19 costs. We had all hoped that by this holiday season, we'd be done with the COVID-19 pandemic. I guess that holiday wish will have to top our 2022 letters to Santa. But several coronavirus-related expenses at least now are eligible medical expenses. You can use the tax-deferred dollars in your IRS-approved medical accounts to cover the costs of home coronavirus tests, as well as a pulse oximeter to measure oxygen saturation, and personal protective equipment (PPE). If you don't have an FSA or the like, but do itemize your medical expenses on Schedule A, be sure to bunch these costs there. They could help you get over the 7.5 percent of adjusted gross income deduction hurdle.

4. Don't forget first aid: Many of us are finally seeing family and friend in person this holiday season. And while some of us are mostly worried about Delta and Omicron coronavirus variants showing up uninvited, we probably should focus more on those more common holiday emergencies. Holiday dinner preparation always seems to include a cut here or a burn there. The same happens when you're putting together the kiddos' toys for them to find under the tree on Christmas Day. And speaking of diner, don't forget about the pain caused by over-eating or simply eating Aunt Barb's not-that-good-but-you-love-her casserole. Or the headaches after the dinner detoured down an unwanted political off-ramp. A good, and FSA-eligible, first-aid kit can help treat most of these ailments.

5. Take care of tooth trouble: If you cracked tooth when your piece of pecan pie contained an unshelled nut, a dental visit could be warranted. If you can get in by Dec. 31, you can use your FSA funds here to cover the co-pay or deductible. Other common FSA dental expenditures range from basic cleanings to the usual 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, whether for you or a loved one, is not a fun way to wrap up any year, but it is a good way to take care of your teeth and use up your FSA funds.

6. Examine eye care options, too: 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.

7. 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.

Also note that alternative treatment doesn't generally cover cosmetic surgery, even if you're able to schedule a minor nip and tuck by Dec. 31. The only time plastic surgery is an allowable medical expense is when a doctor says it is part of medically necessary procedure to treat or correct a legitimate health-threatening situation.

If you have any doubts about whether an expenditure, be it an item or a service, is medically approved by the Internal Revenue Service, check with your benefits office first. And of course, talk with your tax professional.

Also check with your workplace about the possibility of rolling over some unused FSA money into the next benefits year, or whether your company allows you a grace period until March 15 to use the funds so you don't lose them.

If, however, you must spend your FSA money by Dec. 31, use this potential expenditure list to get your own started!

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