As the year comes to an end, individuals with health-care flexible savings accounts (FSAs) may have a few weeks left to use any leftover money. FSAs allow individuals to save pretax dollars and use the funds for qualified medical expenses, with an annual contribution limit of $3,050 in 2023. Unlike health savings accounts, FSAs have a “use it or lose it” policy, but some employers offer a rollover or a grace period.
About 42% of employers offer a rollover, allowing individuals to carry up to $610 into 2024, while 26% offer a grace period of an extra two and a half months to spend down 2023 funds. The remaining 33% of employers do not offer either accommodation, and 48% of workers in this situation end up forfeiting some of their pretax dollars. To take advantage of leftover savings, individuals can consider investing in a biometric or fitness tracker, scheduling year-end doctor’s visits, stocking up on over-the-counter medications, purchasing women’s health products, buying certain skin care products, planning ahead for a new baby, and preparing for New Year’s resolutions.
FSAs can be used for various eligible expenses, including activity trackers, doctor’s visits, dental care, over-the-counter medications, women’s health products, certain skin care products, and items for new babies. It’s important for individuals to be aware of their employer’s FSA rules, and if uncertain, they should reach out to the company’s human resources department.
Additionally, individuals can plan ahead for future years by paying attention to their FSA balance, using funds throughout the year, and ensuring they do not put aside too much money during open enrollment. In 2024, the annual contribution limit for health FSAs will be $3,200, according to the IRS.
