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Making The Most Of Your 2021 FSA Money

We’re nearing the end of the year. And if you have a Flexible Savings Account (FSA), it’s a great time to check in on what funds you might have left — and decide what to do with them. 

This year, just like during 2020, rules surrounding Flexible Savings Accounts (FSAs) are a bit out of the ordinary. (Quick refresher: There are different types of FSAs. But in some, you can save money pre-tax for qualifying medical expenses.) Relief legislation passed last year boosted the amount of money most patients could store in their FSAs in 2021. This year, you also may be able to roll over unused funds into 2022.  

While the government made certain aspects of FSAs less restrictive this year, what you can take advantage of depends on what your company decided to partake in. 

Whether you decide to roll over any funds you have left — or you want to use what you have saved up to stock up on some products for the new year — is up to you. We pulled together a guide for anyone a little unsure about the ins and outs of FSAs, what you can buy with money saved in them and more. 


How is an FSA different from an HSA?

Both flexible spending accounts (FSAs) and health savings accounts (HSAs) let employees tuck away part of their paycheck before taxes to spend on eligible medical expenses, like doctor’s office co-pays, devices like asthma inhalers, or procedures like surgeries. 

In 2021, individuals could contribute up to $2,750 to their FSAs. The IRS recently upped that amount to $2,850 for 2022. HSAs usually have higher contribution limits, and if you leave your job your HSA can go with you. There’s also no deadline when it comes to spending HSA money. This is typically not the case for FSAs. 

Can I roll over FSA funds, or do I need to spend the money now?

FSA money is usually “use it or lose it.” If you haven’t used the money by a certain deadline – usually the end of the calendar year – the money is gone. But the pandemic has changed things; Like last year, this year you may be able to roll over all of your remaining FSA money too. (To be sure you qualify, make sure to check on your individual benefits.)

Employers have always had discretion when it comes to how to run an FSA. Before the pandemic, companies could decide to let workers carry over a portion of the money (previously up to $550, but the IRS just raised it to $570) or give a spending grace period of a few months. In 2019, around 78% of accounts allowed for at least one of these exceptions, per the Employee Benefit Research Institute.

Now, companies can let employees carry over the full amount of their remaining FSA balance into the following year. (So, for instance, if you have $1,700 left over in your account, you can carry over $1,700 to use in 2022.) This only applies if your company opts to go along with the new guidance. 

What can you spend your FSA money on?

You can use FSA accounts for medical and dental care including doctor visit copays, prescription medicine, over-the-counter medicines and a long list of supplies and products like contact lens solution, crutches and breast pumps. 

In 2020, the IRS finally announced people could use FSA money for period products like tampons, pads, panty liners or menstrual cups. It also loosened restrictions on using FSA money for ibuprofen, heartburn meds, allergy meds and cold/flu meds. You can now purchase these with those funds for the first time since 2011 without an Rx. 

“For years, women’s groups have argued it’s a cost women can’t avoid, and one they incur from teenage years well into adulthood,” says Roy Ramthun, founder and president of HSA Consulting Services. “Now that the rule has been changed, I really don’t think that genie goes back in the bottle.”

Have leftover money? And would rather spend it than roll it over? If you want to invest in some at-home COVID-19 tests, these are currently eligible, per the IRS. A secret that many also forget about FSAs is you can spend the money on prescription sunglasses, or other eye wear. A detailed list of eligible FSA items is available at Healthcare.gov. 

Now that I know what I can buy, where can I go shopping?

In many cases, you’ll receive an FSA card you can use to go shopping. These are essentially the same as debit cards, but it’s important to note that they can’t be used everywhere! Under other plans, you might have to pay for things out of pocket and get reimbursed later. 

The easiest way to make sure you’re picking solely eligible products is by visiting the FSA store, a one-stop shop for everything FSA eligible. If you purchase something from here with your card, you likely won’t need to do further paperwork. However, it’s recommended you still save any receipts…just in case. Otherwise, most stores that sell FSA-eligible items take FSA cards. For example, you can likely use your FSA card at retailers like Walmart, Target or Costco and your local pharmacy, as long as you’re buying eligible items.

What else should you keep in mind?

Keep hard copies of receipts or scan them and store everything online in case you need to prove that you’ve spent the money on eligible expenses. “You can always be audited,” Ramthun says. 

Some plans will suspend your FSA card if you don’t give them the paperwork they need within a certain number of days. Many FSAs, however, will open up your card for 24 hours if you need to use it while you’re tracking down receipts. If that’s the case, call your plan and your card should be activated again that same day.

As the end of the year approaches, login to your FSA account as soon as possible to see how much money you have left. Then, to find out what changes your employer may have adopted this year, contact your human resources department or pay close attention to open enrollment information your employer may send out this fall. Then, you’ll be more informed when deciding on paycheck deductions for 2022.

Will all this FSA flexibility continue into 2022 as well?

Experts aren’t quite sure. Paul Fronstin, director of health research at the Employee Benefit Research Institute, says this could be the last year employees get to carry over their full FSA balance, though there’s always a possibility that lawmakers could propose making it permanent. 

Ramthun believes it depends on how long the COVID-19 pandemic lasts and says that “2023 is too far in the future to tell at this time.”


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