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Americans with flexible spending accounts for healthcare expenses could be at risk of losing money due to forfeiture if they don’t spend the funds by the expiration deadline — which for many is fast approaching.
See: What Is an FSA and How Does It Work?
Find: Surprising Things You Can Buy With Your FSA
More than $1 billion could be forfeited in 2022, CNBC reported, citing an estimate from FSAstore.com. Many of those forfeitures could happen by March 15, which is the spending deadline established by a two-and-a-half-month grace period that went into effect on Dec. 31, 2021.
With FSAs, workers can stash away pretax money for qualifying medical expenses or dependent-care expenses. The 2022 limit for contributions to healthcare FSAs is $2,850, up from $2,750 in 2021.
As CNBC noted, the standard deadline to use healthcare FSA money is Dec. 31 of the year you make the contributions. But more than one-third of employers (35%) allow a two-and-a-half-month grace period to spend the money, according to the Employee Benefit Research Institute.
If you don’t spend the money by the deadline, you forfeit all or part of it — something that happens to 37% of workers with a grace period, the EBRI estimates. That’s still below the 48% of workers with a traditional Dec. 31 deadline who forfeit money and 49% who are allowed to roll money over to the next year.
“We’re concerned that if workers don’t understand their deadlines … they’re going to forfeit money,” Rachel Rouleau, vice president of compliance at FSAstore.com parent company Health-E Commerce, told CNBC.
Explore: HSA vs. FSA — What’s the Difference?
For workers who are fuzzy on the rules, she recommends contacting your company’s human resources department. You also can check your online FSA portal for information if your company offers one, or call the phone number on the back of your FSA debit card.
If you are unsure how to spend the money in your account, you have a lot more choices now than before thanks to an expansion of what qualifies as eligible medical expenses approved by Congress.
As an example, you no longer need a prescription to buy over-the-counter drugs — including cold medicine, anti-inflammatory drugs and allergy medicine — with your FSA card. Other items that are now eligible include menstrual care products, at-home COVID tests, masks and hand sanitizer.
And as always, FSA funds can be used to cover doctor and dentist appointments, prescription drugs and other health services.
“There are literally thousands of ways to spend down funds on things they need before it’s too late,” Rouleau said.