Using up Flexible Spending Plan allocation

December 5, 2005 10:36 AM

We have $3,000 left in our Flexible Spending Account (FSA)... pre-tax dollars that must be used by year's end or we forfeit them. We're married, about 40, with no children. Any ideas for good big-ticket items/appointments (health-related) to avoid losing our own money?

We had to choose the yearly allocated amount last December, and were forbidden to adjust it during the year. So it's often a guess. It baffles me why, instead of simply making health costs deductible, we have this scheme where we have to gamble with our own earnings. But I'm not a tax guy or HR person.

posted by kurumi to health & fitness (39 comments total)

Lasic eye surgery.
posted by k8t at 10:37 AM on December 5, 2005

I'm curious; do you know where the forfeited money goes?
posted by reverendX at 10:38 AM on December 5, 2005

If not Lasix, load up on contact lenses (get plain and colored, so you can change your eye color), and each of you could get new glasses, regular plus prescription sunglasses.

My husband also had his silver fillings replaced with white -- not to use up money, but because the silver ones were getting so old.
posted by GaelFC at 10:38 AM on December 5, 2005

Orthotics for your shoes. Contacts, glasses & sunglasses, as noted above. Massage therapy every lunch hour for the rest of the month. Physiotherapy.
posted by acoutu at 10:42 AM on December 5, 2005

Find a small business owner -- dentist, gym, fitness trainer, massage parlor -- and explain the situation. You can find someone who'll be happy to sell you X number of appointments, usable in the next year, for a payment up front.

I'd probably either cut a deal with our local spa, or I'd buy an elliptical trainer.
posted by cribcage at 10:44 AM on December 5, 2005

Personal trainer for three months for both of you? Or, personal health food chef for a month or so?
posted by spicynuts at 10:44 AM on December 5, 2005

Braces. Onlays. Other dental work. Full physicals with complete bloodwork, stress tests, etc.

Note for future: don't put money in an FSA "just in case." You're finding out why now. I think either your employer or the FSA management company gets to keep the money (check your contract terms). (The other side of the equation, at least on my FSA plan, is that you can spend all the money on January 1, even though you haven't paid any in yet, and if you quit before the year is out, you don't have to pay it back. Check your plan before deciding to try this, though.)
posted by spacewrench at 10:45 AM on December 5, 2005

Maybe you could get one of those 'body scan' MRI things. Otherwise either laser eye surgery or a ton of glasses and contacts. Eyeball accessories for every occasion.
posted by delmoi at 10:45 AM on December 5, 2005

No answers here (except to say I *love* my Lasik!), but that's how FSAs were explained to me -- use it or lose it. Makes zero sense to me, to the point that I thought the guy explaining *must* be wrong.

Maybe a tax guy can jump in to confirm/refute that this is how FSAs actually work..?
posted by LordSludge at 10:46 AM on December 5, 2005

Buy a bunch of expensive eyeglass frames and sell them? Or go to one of those "medical supplies" stores and buy some expensive piece of equipment that you can probably sell on eBay.
posted by shoepal at 10:48 AM on December 5, 2005

Crowns & lasik
posted by Pressed Rat at 10:49 AM on December 5, 2005

Looks like you have until March 15th to use the money. Also, on use-it-or-lose-it, from https://www.fsafeds.com/fsafeds/faq.asp#fsa7:
If I didn't use all the money allotted to my HCFSA during the year, can I get the money refunded to me?
No. Participants have until March 15 of the following year to incur eligible expenses and money remaining in your account after that date will be forfeited. You will forfeit any money not claimed by May 31 of the following year. This is the major reason employees need to be conservative in their estimate of how much money to allocate to an FSA.


Where can I find the use-it-or-lose-it rule?
The answer is derived from looking at several sections of the Internal Revenue Code (IRC). Section 125 of the IRC (26 CFR 1.125) is the section of the IRS code that makes it possible for employers to offer their employees a choice between cash salary (your regular salary) and a variety of nontaxable benefits, called qualified benefits. A qualified benefit is a benefit that does not defer compensation, and which is excludable from an employee's gross income under a specific provision of the Code.

Employers may offer flexible spending accounts to employees under a cafeteria plan. FSAs provide coverage under which specified, incurred expenses not reimbursed under any other health plan and dependent care assistance program may be reimbursed to the employee pre-tax. Contributions to the FSA occur when an employee agrees to contribute a portion of his/her salary (reducing salary) and the employer agrees to contribute that portion to an FSA for that employee. Since you never receive the money (called constructive receipt), you can't be taxed on it. If you were able to get unused amounts out of your FSA at the end of the year, you would be receiving deferred compensation, which is expressly prohibited by Section 125. Thus, the use-it-or-lose-it rule.

See Section 125-1, Q&A-17, Section 125-2, Q&A-7 (a) and (b)(1) through (7).
posted by ch1x0r at 10:55 AM on December 5, 2005

cribcage has the best suggestion. Pay up front, get a receipt dated this calendar year, for anything you might use next year. The receipt should show an actual service performed or item purchased, though, and not reflect the prepayment arrangement.

The way to manage these things is to project what you reasonably will spend on out of pocket costs and set that aside in the account. Even if you don't use the whole amount, you've still got the tax savings so you're probably ahead of the game -- and most people can find an end-of-year strategy to use up a smallish residual.
posted by beagle at 11:00 AM on December 5, 2005

Second dental work - perhaps sealants, which protect against cavities for many years but aren't covered by most insurance after age 14? Sealants run around $70 per tooth and can be done on all teeth with flat surfaces (so no canines or whatever the pointy ones are called, and no front teeth).
posted by aberrant at 11:01 AM on December 5, 2005

We inventoried our medicine cabinet and stocked up on everything including items our kids wanted. You can always buy for charity medical supplies / aspirin / etc as and donate it for a tax deduction although I don't think that is quite legal !
posted by orlin at 11:01 AM on December 5, 2005

I thought you have until March 31st to claim against costs that you incurred this year, but my FSA may be different from yours.
posted by 5MeoCMP at 11:11 AM on December 5, 2005

Can you not buy into a mutual fund or something like it?
posted by sourwookie at 11:16 AM on December 5, 2005

Here's a list of eligible expenses. I was surprised to see lead based paint removal listed.
posted by leapingsheep at 11:22 AM on December 5, 2005

Massage therapy. Also, take a trip to a spa in a foreign country known for it's healing waters or something. Get a vacation out of this.
posted by xammerboy at 11:23 AM on December 5, 2005

ch1x0r has pointed out a March 15th deadline to incur costs. But that may or may not apply to kurumi's situation - it depends on the employer:

The Treasury Department recently released guidance that will allow employers the opportunity to extend the reimbursement period for health care and dependent care FSAs. Currently, expenses must be incurred during the calendar year. Under the new ruling, an employer can choose to amend its plan document to allow a grace period of up to 2-1/2 months after the end of a calendar year. Claims incurred during the grace period would be paid from the previous year's election amount. In effect, this would reduce the chances that participants would forfeit unused monies.

Short answer: ask the HR department. And if the answer is that the deadline is December 31st, think about raising the issue with someone (head of HR? boss? employee association? union?) Your fellow employees will thank you.
posted by WestCoaster at 11:26 AM on December 5, 2005

If there is a lot of sun in your backgrounds, I would recommend going to a dermatologist for a full inspection of your skin.

There are treatments that can deal with "damaged" skin that may or may not turn up cancerous in the future.

Not cheap, but once one hits 50, basal cell carcinomas can come with the territory.
posted by Danf at 11:43 AM on December 5, 2005

Go see a derm anyway, it's the easiest, most painless, quickest cancer screen you can do for yourself and it can very well save your life when you're least expecting it (trust me on that one). Melanoma ain't no joke. Try to find a derm that specializes in cancer/pigmented lesions, rather than a cosmetic specialist.
posted by kcm at 11:52 AM on December 5, 2005

What an odd program - things work a lot different up here in Canada. We get to deduct medical expenses directly, but only over a certain amount and there's a weird 12-month-sliding-window rule about when you can claim.

I was amused by the list of explicitly ineligible expenses, which seem obvious given the list of explicitly eligible expenses, but I guess people will try to claim anything:

Dancing Lessons
Funeral Expenses
Household Help
Illegal Operations and Treatments
Swimming Lessons
Veterinary Fees

plus other ones that were less funny. "Funeral Expenses"? I don't know whether that's good-funny or bad-funny... "Well, it was due to a pre-existing health condition, so we have to disallow it".

Anyway kurumi, don't try to claim for any of these. You can claim for a lot of over-the-counter things though, including band-aids, so go out and make a kick-ass first aid kit. That would be cool. Heck, make 10 $100 first aid kits and they'd be great Christmas gifts.
posted by GuyZero at 12:34 PM on December 5, 2005

I believe drugstore.com (perhaps others) mark all items as FSA-eligible if they qualify, FYI.
posted by kcm at 12:35 PM on December 5, 2005

radon remediation
posted by IndigoJones at 1:04 PM on December 5, 2005

WestCoaster has it right--check with your employer. Many have adopted the grace period, but not consistently.
posted by deadfather at 1:45 PM on December 5, 2005

Please, please, follow leapingsheep's link above, and do the minor homework to find out what the IRS and your own employer consider eligible for reimbursement through your FSA.

Otherwise you might be stuck not only losing your money from the FSA, but be out the money you spent in trying to generate reimbursable expenses.

I'm sure posters who suggested items like "vacation" mean well, but you'd be the one stuck with the bill.
posted by clever sheep at 1:46 PM on December 5, 2005

Ditto clever sheep. I used to administer the FSA for a subsidiary of Chrysler. The following expenses that have been suggested are NOT covered by FSA's (or, if they are now, the IRS has really gotten permissive!)

-Vacations
-Massages
-Personal trainer
-Visits to a gym
-Personal health food chef
-(Strangely enough) Psychotherapy has very strict reimbursement rules dependant upon the credentials of the therapist. Best to check this one out to see if the person you would be seeing qualifies for reimbursement.

Wouldn't all of these be nice? Unfortunately, Section 125 governs these plans, not your employer. The government determines what is reimbursable and when, and they also created the "use it or lose it" stipulation. So, appealing to your employer will do nothing. Your employer has to comply with the tax code in order to run a qualified plan.

The suggestions to get extra eyeglasses and contact lenses is a good one. Replacing silver fillings with porcelain is also good (this is seen as a "grey area" reimbursable expense...although this could be classified as "cosmetic", the material in amalgam fillings is a little controversial and the jury is still out on some--if any--of the health issues associated with amalgam fillings. So they normally let it go through.) Over the counter drugs from the pharmacy. "Well care" testing and/or visits not covered by your medical plan but performed by doctors and/or specialists, such as full physicals and so forth. All good.

Why so restrictive? Well, when FSA's began in the 80's, they weren't so restrictive. And people tried to claim ALL SORTS of nutty things to avoid paying taxes. Cosmetic surgery was BIG! I even got a claim for a hot tub once (employee...a VP who could have afforded to buy ALL of us our own hot tubs claimed he wanted it for his bad back. It sat six.) So, yes, the IRS cracked down because it was really getting abused.

You have to use the money by the end of the plan year (I'm guessing that this is December 31st) in order to submit your claim. Some employers DO allow a grace period for claim submission from the PREVIOUS plan year that extends 2.5 months after the plan year ends (in your case, you can submit the claim for payment until March 15th). Not all of them do, however. So check. And you have to have spent the money during the plan year only. So, if your receipt is dated January 15th, no go.
posted by jeanmari at 2:07 PM on December 5, 2005

My employer specifically allows claimable expenses up through March 15 of the next year. That is, I have until March 15, 2006 to use my 2005 FSA money. I still have to submit all claims by March 30. I wanted to be sure about this, so I asked my HR person. YMMV!
posted by lhauser at 3:24 PM on December 5, 2005

I have this exact same problem, to the tune of $500 that I basically don't have. I'm going to be broke for a couple of weeks, just to get back my own money. I have no idea why I signed up again.

That said, I'm planning on buying another pair of glasses, some glasses for my girlfriend, and vitamin pills. Lots and lots of vitamin pills.

I'll be watching this thread with great interest.
posted by interrobang at 3:48 PM on December 5, 2005

lhauser--

I stand corrected! The IRS did amend the option to extend the use it or lose it time period about 6-7 months ago. Since I no longer adminster these plans, this was news to me!

Also, they ruled to cover the costs of weight loss programs (except for the food) in 2002. Other things to consider: accupuncture and/or birth control pills (wow, if you could get those in advance, great!).

I should also clarify that, even though over-the-counter medicines are deductible, vitamins and dietary supplements still do not seem to be. For a complete and up-to-date list of reimbursable expenses (the IRS calls them "includable"), including the details that make these expenses qualified, see Publication 502 from the IRS.

p.s interrobang: you may want to check with your employer to see if your girlfriend would meet the qualifications for coverage under your plan. It used to be that anyone reimbursed under an FSA had to be a spouse or other legal dependant. Don't know if that has changed.
posted by jeanmari at 5:00 PM on December 5, 2005

American College of Pathologists recommends a single screening colonoscopy at age 40; I believe the family practice and internal med societies say you can wait until 50. Still, once you have it, if it's normal you don't need another one. I imagine that two of them would run about $3K. However, you'd want to see whether a recommended screening 'scope was covered by your health insurance. (Do you *have* health insurance? What's its deductible?)

Stocking up on eyeglasses and lenses isn't such a great idea if your prescription changes every year or so, like mine. Can you get eyeglass frames with this money? Never hurts to have an extra pair of the ones you like in case the company stops making them.

The above posters suggesting visiting a dermatologist for melanoma screening don't know that you're black-skinned. Neither do I, but melanoma pretty much doesn't happen to black people. You might want to check your skin tone before you invest in that; the darker it is, the less skin cancer is a risk for you.

If either of you want Botox or cosmetic facial or breast surgery or liposuction or penis enlargement, there are all kinds of hucksters around who will be happy to write you a letter of medical necessity.

Dental care's already been mentioned, but if either of you have been putting it off this is clearly the right time.

In future, don't put money into the flex account until you know what you're going to use it for.
posted by ikkyu2 at 5:02 PM on December 5, 2005

Vasectomy? Mine cost $1400 and was not covered by insurance.
posted by Invoke at 10:56 PM on December 5, 2005

Stock up on over the counter medication for youself or someone else. If you're going to loose, it call up a local homelss shelter or something and ask them what OTC medicines they could use.

I used to manage a small company's FSA. Back then (two years ago...) the way it worked was that you had to use it of loose it by the end of the year but you could request the reimbursement until March or so. If you "loosed" it, the money would go into the pocket of thte employer and it was up to them to decide to keep it or to divvy it up to all the employees who were enrolled in the plan EQUALLY. It was not allowed to simply let the employees that "loosed" it to get it back.
posted by pwb503 at 10:58 PM on December 5, 2005

Still, once you have it [colonoscopy], if it's normal you don't need another one.

It's every 10 years after age 50, ikkyu2.
posted by gramcracker at 11:18 PM on December 5, 2005

I don't intending on living long enough to get repeatedly rectally plumbed by the likes of you, cracker.
posted by ikkyu2 at 11:55 PM on December 5, 2005

For federal employees, the flex health account (and day care account) is free money.

But you've got to "low ball" the amount, at least the first year until you get a sense of how much you'll spend. I looked at my last year's medical expenses before committing to the final amount.
posted by Taken Outtacontext at 10:15 AM on December 6, 2005

Dermatologist! For a whole buncha money they'll take a big whole-body photo of you to use for future comparisons of skin growths. Since skin cancer is the most survivable if you detect it early I can't think of a better use of a big chunk of use-or-lose money than that. Perhaps that's my pale-skin too-many-childhood-sunburns perspective talking though... But it seems to me that such data would still be useful in 1, 2 or 10 years.
posted by phearlez at 12:18 PM on December 6, 2005

Vasectomy? Mine cost $1400 and was not covered by insurance

That cost figures seems a bit high. You can go to Canada and get one done for $USA 250 - $380. Planned Parenthood says Nationwide, the cost of a vasectomy ranges from $350-$1,000 for an interview, counseling, examination, operation, and follow-up sperm count.

And a lot of insurance plans do cover this, in which case the cost would just be the deductible and/or co-pay.
posted by WestCoaster at 11:56 AM on December 13, 2005