Compliance Connection

You have extra money in your Flexible Spending Account. Now what?

Flexible Spending Accounts (FSAs) are a great way to help reduce your taxable income while paying for eligible medical and dependent care expenses. But if you’ve experienced a decrease in those expenses as a result of the COVID-19 pandemic, you may be wondering what will happen to the funds in your account.

Use or Lose

Healthcare Flexible Spending Accounts (Healthcare FSAs) are "use or lose" accounts. This means, if you don’t use all the money in the account at the end of the plan year, it is lost. In response to COVID-19, recent legislation has offered some relief for Healthcare FSA participants, including the opportunity to make mid-year election changes and take advantage of extended expense and claims periods. These new rules provide some relief from the “use or lose” rules. Some employer plans have chosen to elect a “grace period” or “rollover provision” as part of their plan. To find out how your specific plan works, contact your employer or Health FSA provider.

Medical Supplies

With an increased focus on social distancing, many people have delayed elective medical procedures or care. If you have decreased your medical spending this year, there may be extra funds collecting in your Healthcare FSA.

One way to spend excess funds is by purchasing eligible medical supplies you need. Examples of eligible expenses include thermometers, sunscreen (SPF 15 or higher), first aid cream, and bandages. Plus, as a result of the Coronavirus Aid, Relief, and Economic Security Act, participants may now use their Healthcare FSA dollars to purchase over-the-counter drugs without a prescription.

View a full list of eligible expenses here

And, remember to keep your receipts to submit for reimbursement on all eligible medical expenses. While many of these products may be purchased in stores, you don’t have to leave the house to find what you need. Visit FSAStore.com for a convenient way to spend Healthcare FSA dollars online.

For more common questions about HSAs, visit https://americanfidelity.com/blog/reimburse/common-hsa-questions/

Column Provided by: Tom Sledge, Arkansas State Manager, American Fidelity Assurance Co.