5 Creative Ways to Spend Your Remaining FSA Funds
The end of the year is nearly upon us, and some consumers are feeling the pressure to use up the funds in their flexible spending accounts before they must forfeit the money.
FSAs allow employees to set aside pretax dollars for medical expenses. But the amount you choose to set aside must be determined during open enrollment for the coming year. So even if you project your expenses based on this year's, determining just how much to contribute to your FSA involves a certain amount of guesswork.
If you overestimated how much you would spend on medical costs in 2014, there's still time to make the most of your leftover FSA money.
Is Your FSA a 'Use it or Lose It' Account?
Unlike a health savings account, FSA funds do not accumulate over the years. Prior to a 2012 IRS rule change, all FSA accounts required you to use up the funds by the end of the year or lose them entirely. But the rule change means that employers can let workers carry up to $500 into the next year. It also allows employers to offer a grace period of up to two-and-a-half months to use remaining FSA funds.
But neither of these are requirements, and your employer can only offer one of these perks -- the carry-over or the grace period. Some employers offer neither.
Check with your human resources department at work if you're unsure of your FSA plan's specifics.
How Can You Spend It?
FSA funds are accessible for qualifying medical expenses. What constitutes a qualifying medical expense? The IRS determines that, and the definition has been considerably restricted over the past several years.
While over-the-counter medications used to be allowable expenses, that's no longer the case. Generally, most over-the-counter drugs must be accompanied by a prescription in order to be eligible. But there are other ways to spend your funds.
1. Acupuncture
Unlike some other forms of alternative medicine, there is significant research backing the effectiveness of acupuncture in the treatment of many conditions.
The National Center for Complementary and Alternative Medicine says acupuncture may be particularly valuable if you suffer from chronic pain, including migraines, arthritis and lower back pain. Research continues to determine its effectiveness in the treatment of conditions such as depression, addiction and side effects of cancer treatment. Acupuncture costs vary widely, but could help you use between $60 and $120 of your FSA funds per session.
2. Chiropractic care
Like acupuncture, chiropractic care has demonstrated positive effects in the treatment of a variety of pains. According to the American Chiropractic Association, it can increase range of motion, decrease muscle spasms, and reduce joint pain and the frequency of migraines. A single chiropractic treatment, adjusting one or two spinal regions, will normally cost less than $100, but chiropractic clinics often encourage new patients to come in several times.
3. LASIK surgery
If you need corrective lenses, you may be eligible for laser eye surgery, commonly known as LASIK. This surgery changes the shape of your cornea and ideally allows you to see without eyeglasses or contact lenses. Because it's usually considered an elective procedure, health insurance plans don't typically cover LASIK, leaving some consumers with a hefty medical bill if they opt for the surgery.
Your FSA is one way to take advantage of the procedure without incurring medical debt. Consumer Reports estimates LASIK surgery costs $1,657 per eye, though some consumers report paying less than $499 or more than $4,000.
4. Weight loss programs
If your doctor determines it's medically necessary for you to lose weight, you could use your FSA funds to pay for a weight-loss program. Your physician will need to provide a letter of medical necessity for the costs to be covered.
Meal replacement programs could cost a few hundred dollars a month, while more comprehensive hospital-managed weight loss programs typically come with higher price tags. The University of California San Francisco Medical Center, for example, charges a $1,250 fee to start its yearlong Step-By-Step Program, plus $500 for the first three months and $250 every three months thereafter. A meal replacement plan comes at an additional cost.
5. Dental care
Non-cosmetic dental care is covered as an FSA-eligible medical expense. Covered treatments usually include crowns, implants, sealants and general dental maintenance. Dental fees vary widely, though you can generally get a comprehensive oral exam for less than $100, a resin-based filling for around $150 and a porcelain crown for nearly $1,000.
Plan Ahead
Take what you've learned about your 2014 health costs and apply it to your FSA estimations for the coming year. These accounts are a smart way to save for medical costs and reduce your tax burden, but you'll want to avoid using your extra funds on treatments or procedures you wouldn't normally get.
