What Happens to Unused FSA Funds?

What Happens to Unused FSA Funds?

Flexible Spending Accounts (FSAs) are pre-tax savings accounts that allow employees to set aside money for medical expenses. However, many people wonder what happens to unused FSA funds at the end of the year. In this article, we will explore the options available to FSA account holders and provide some tips on how to make the most of your FSA funds.

Rolling Over Unused Funds

One option available to FSA account holders is to roll over unused funds at the end of the year. However, this option is not available to all account holders. According to IRS guidelines, employers can choose to allow participants to carry over up to $550 of unused funds to the following year. Employers can also offer a grace period of up to 2.5 months after the end of the plan year to use the remaining funds.

Spending Down the Remaining Balance

If your employer does not offer therollover optionor grace period, it's important to spend down the remaining balance before the end of the plan year. This can be done by scheduling doctor's appointments, purchasing prescription medications, and other eligible medical expenses. It's important to keep track of your FSA balance and plan your expenses accordingly to avoid losing any unused funds.

Investing in Long-Term Medical Expenses

Another strategy to make the most of your FSA funds is to invest in long-term medical expenses. For example, if you know you will need braces for your child in a few years, you can use your FSA funds to pay for the braces now. This can help you save money in the long run and avoid losing any unused funds at the end of the plan year.

Using FSA Funds for Over-the-Counter Medications

In the past, FSA funds could only be used for prescription medications. However, the rules have changed, and now FSA funds can be used for over-the-counter medications as well. This includes items such as pain relievers, allergy medication, and first aid supplies. This change can help account holders make the most of their FSA funds and avoid losing any unused funds at the end of the plan year.

In conclusion, there are several options available to FSA account holders for unused funds. Whether it's rolling over the remaining balance, spending down the balance, investing in long-term medical expenses, or using FSA funds for over-the-counter medications, it's important to plan ahead and make the most of your FSA funds. By doing so, you can save money on medical expenses and avoid losing any unused funds at the end of the plan year.