Your FSA Balance Has an Expiration Date: Check It Before the Year Ends
What Should You Do Before the Deadline?
Shanti
11/10/20262 min read
Your FSA Balance Has an Expiration Date: Check It Before the Year Ends
Some of the money you set aside for medical expenses could go unused and be lost. If you have a health care Flexible Spending Account, or FSA, through your employer, reviewing your balance and spending deadline should be on your year end checklist.
An FSA allows employees to set aside part of their pay before taxes to cover eligible medical expenses. This can provide tax savings on costs such as deductibles, copayments, and certain medications. However, FSA funds cannot be used to pay health insurance premiums.
Why Could You Lose Your Balance?
FSAs generally follow a “use it or lose it” rule. Any unused funds remaining after the applicable deadline may be forfeited.
Some employers allow you to carry over a portion of your balance into the following year. Others offer a grace period of up to two and a half months to incur eligible expenses. Employers are not required to offer either option, and a health FSA cannot offer both at the same time. Check your plan’s rules with your human resources department or FSA administrator.
Your Spending Deadline and Claims Deadline Are Different
Having extra time to submit receipts does not necessarily mean you have more time to make purchases or receive services. You may need to incur an expense before the plan year ends, even if you can submit the receipt several months later. Also, not every plan year ends on December 31.
What Should You Do Before the Deadline?
Start by signing into your account to review your balance, reimbursement requests, and important dates. Then consider necessary, eligible expenses such as doctor visits, dental care, prescription medications, or qualifying medical supplies.
Before making a purchase, confirm that the expense is eligible and keep your receipts. Any expense already paid by insurance cannot also be reimbursed through your FSA.
Does Losing Some Money Mean Your FSA Was Not Worthwhile?
Not necessarily. If your tax savings exceed the amount you forfeit, you may still come out ahead compared with paying the same expenses using income after taxes. However, the goal should be to use your balance thoughtfully for genuine health care needs.
When choosing your contribution for next year, base it on predictable expenses. Regular prescriptions, routine appointments, and planned treatments can help you estimate how much you will need. Contributing the maximum allowed amount is not always the best choice.
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