Time to Flex That Flexible Spending Account

Your use-it-or-lose-it FSA can cover drugstore medicines, office visits, and more.

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You're still trying to get through that case of aspirin you bought last December, and you've never worn the prescription sunglasses you picked up about the same time. Instead of buying a bunch of stuff you don't really want at year-end to avoid losing the money in your flexible spending account, this is a friendly reminder as we pass the midpoint of the year to start spending NOW.

Procrastination may be understandable. But about a third of people leave an average of $168 unspent in their FSAs every year, according to Hewitt Associates. The funds go back to their employers—and that's just idiotic. The typical balance in an FSA is about $2,500, says J.D. Piro, principal and chair of the health law consulting practice at Hewitt. "As a percentage of the account, $168 is fairly low, but it's very high if it's your $168."

Your employer may allow you a grace period of up to 2½ months into the following year during which you can use up any leftover contributions. Check with your company to see if you have that option.

Generally, you can use your FSA contributions for qualified medical and dental expenses, as spelled out in this IRS publication (.pdf). It's a pretty broad list, covering everything from acupuncture to in vitro fertilization. However, individual employers may edit the list of qualified expenses, so make sure you check to see what your company allows.

You can get reimbursed for copayments, deductibles, and other amounts not paid by your plan, but you can't use it for health insurance premiums. FSA dollars are also good for over-the-counter medicine, so make sure you hang onto your receipts. You can even use your FSA to cover mileage costs related to medical care. That may not have been a big deal in years past, but with $4-a-gallon gas, that 20 cents a mile is looking better all the time.