Add to your end-of-year to-do list: check your health flexible spending account.
These accounts help you save money on some health-care costs, because you pay for them with pretax dollars, yet not everyone uses them. According to the Bureau of Labor Statistics, 39 percent of workers in 2015 had access to a health-care FSA. About one in five workers took advantage of these plans, contributing an average of $1,338.
You decide on an amount in advance and use the funds throughout the year to pay for medical expenses. But you have to use the money by a certain date — generally as soon as Dec. 31 — or it’s gone.
Employees forfeited 5 percent of their contribution dollars in 2016, according to Mercer, when the cap was $2,250.
The next thing to do is check your plan description. The IRS has now built a little more breathing room into the accounts. Some plans allow you to carry over $500 into the next year, and others let you have until March 15 of the following year to submit receipts. Your company can’t give you both extensions, and it doesn’t have to do an extension at all. Find out if you have some leeway.
Get ready to spend
A lot of people forget some of the less-obvious things you can pay for using flex spending, says certified financial planner Carolyn McClanahan, founder of Life Planning Partners in Jacksonville, Florida.
Some items don’t seem truly medical, and people tend to forget about them, McClanahan says, such as contact lenses, contact lens solution, and other vision-care products.
Even less obvious: pre-moistened lens wipes, lubricating eye drops, progressive reading glasses and contact lenses cases. Now might be a good time to stock up on travel sizes of eligible items, such as contact lens solution. Pregnancy testing kits and other family planning items also qualify, and can easily be set aside for later use.
The IRS has a detailed list of eligible purchases.
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A plan for next year
If you find yourself scrambling to stock up on these items, start out the new year with a system. McClanahan tells people to create a folder at the beginning the year labeled “medical.” Put all your medical receipts and paid bills in it, then set aside a time once a month to submit documentation to the company that handles the account.
“If you have a hard time using it, then you have to think in advance what you’re going to do next year,” McClanahan said. “You can use it now to get glasses, dental coverage, a number of different things.”
Keep regular tabs on your spending and claims, says Kerry Anne Jackson, a CFP with Fish and Associates in Memphis, Tennessee. “Check your records, make sure you’re getting the payments,” she said. “More companies arrange for direct deposit of funds, but some still issue paper checks.”
McClanahan recommends Follow Up Then, the email reminder service. The free plan lets you schedule 50 emailed reminders a month.
If it’s difficult to use your FSA funds during the year, you might consider withholding less. The money might do more good in your 401(k) plan or in an individual retirement account, Jackson says.
Common drugstore items
You’ll have to go through some extra steps when buying aspirin, ibuprofen and most cold medicines. These items qualify for FSA spending, but you must have a doctor’s written prescription. This sounds strange, since these products can be bought over-the-counter and don’t need a prescription. But if you want to pay for them out of flex spending, you’ll need one.
“That’s why it’s good to have a family doctor that cares about you,” Jackson says. That relationship can help you get the paperwork.
Other drugstore items are easy — no prescription necessary — such as wound care (Band-Aids and antibiotic ointment) or sunblock, as long as the SPF is high enough.
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Easy ways to shop
One place to spend flex spending dollars online is the FSA Store, which lets you link your FSA card to pay for eligible items.
You can also use flex spending through online pharmacies such as Walgreens and CVS. The latter has a simple explainer that tells you how to access a doctor’s prescription for over-the-counter items that are FSA-eligible.
The HealthProductsForYou site is similar to the FSA Store. Plug in your flex spending debit card as payment and then shop. Everything there is eligible for FSA dollars.
Some online retailers want you to spend $50 to qualify for free shipping. Amazon has an FSA section with no shipping minimums, but be careful. Some items qualify for FSA spending when you buy a single unit, but a set of three doesn’t get the FSA qualification in your shopping cart.
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