A couple of Republican-proposed changes to Obamacare would affect a popular individual savings option, the medical flexible spending account, or FSA.
Tax-saving company benefit: An FSA is a benefit offered by many companies where workers can have a certain amount taken from their paychecks every pay period and placed into a special account. These accounts can help you cover such things as child care, commuting and medical expenses.
Even better, the money is put into the FSA before your payroll or federal income taxes are calculated. That means that while you’re losing some money to the account, the amount of taxes deducted from our pay also is less so it could be close to a wash cash-flow wise.
You then use the FSA money to pay for your related costs.
With a medical FSA, that includes co-pays, deductible expenses, the amount you owe once your deductible is met and a variety of health care costs that the Internal Revenue Service says are deductible but that your health insurance might not cover, such as prescription glasses or contact lens.
Under the Affordable Care Act, or what most of us call Obamacare, the amount you could put into an FSA was limited. Also, it got more difficult to use the account money to buy over-the-counter medicine. The GOP proposal would do away with those restrictions.
More time to use, not lose FSA money: But one FSA component that remains is that for the most part, it is a use-it-or-lose-it option.
If you have any left in the account at the end of your workplace’s benefit year, which for most is Dec. 31, your employer gets that money.
Some employers have taken advantage of a couple of IRS-allowed FSA extension options. They either let you roll over up to $500 left at year’s end in the account into the next benefit year. Or they give you a two and a half month grace period to spend your excess FSA money.
That grace period is about to end. The deadline for spending FSA money if your workplace offers the extension is March 15.
Ways to spend FSA money ASAP: So how can you quickly get rid of your extra FSA money in the next few days so that you don’t lose it? The FSAStore.com has some suggestions.
- Travel. Yes, we are talking about a quick trip to your local pharmacy to pick up some prescriptions. Those miles can be reimbursed by your FSA at 17 cents per mile. But also think about something a little more long-range. While you can’t use your FSA funds for a quick cruise to the Bahamas, the FSAStore.com notes that you can make yourself more comfortable when you take an island getaway. Stock up on sickness patches, sunscreen and lip balm; all are FSA-eligible expenses.
- Medicine management. If you need boxes to organize your pills, clocks to remind you to take them or cutters to divide one pill into two, it’s all eligible for FSA reimbursement.
- Emergency supplies. It’s always good to have a First Aid kit on hand. Get one for you home and one to keep in your care for family road trips. If you want to go beyond bandages and balm for cuts and scrapes, consider an automated external defibrillator (AED). The cost of this potentially life-saving equipment, notes the FSAStore, can be paid for with your FSA excess balance.
- Youth sports: Summer time is fun time for youngsters. For many, the three- to four-month break from school also means organized sports. If the cost of your youngsters being part of the team(s) mean physicals, athletic tape and hot and cold therapy packs for post-game bruises, your FSA money is available.
- Baby supplies: Are your kiddos much younger? FSA money can help here, too. The FSAStore says FSA-eligible items for moms, moms-to-be and babies include breast pumps and breastfeeding essentials kits, prenatal vitamins, gas and colic relief, nasal aspirators and portable baby monitors.
If you have the FSA grace period and any of these items can help you meet your medical needs, pick them up by March 15.
Medical and dental expenses generally are eligible for FSA reimbursement if they are used for diagnosis, cure, mitigation or the treatment and/or prevention of a medical condition. You can check IRS Publication 502 for more ideas on how to spend your FSA money. You also should talk with your company’s FSA administrator about your spending options.
Just do it soon!
You also might find these items of interest:
- Items to add to your medical FSA shopping list
- Some in Congress want FSA use-of-lose rule eliminated
- Check out tax-saving FSAs during benefits open enrollment season