A busy holidays reminder: It’s use-it-or-lose-it time with health savings accounts

savings-150x150Just how much do you love the company for which you work? Is it enough to want to fork over hundreds or even thousands of dollars that you could spend to benefit the health of you and your loved ones?

Before the hectic holidays engulf us all, your personal finances can benefit if you check your 2022 health care spending, especially taking account of sums you may have set aside in special accounts offered through your employer.

These are known as Health Care Flexible Spending Accounts, aka FSAs. As the federal government defines and explains them to its own employees:

 “A Health Care FSA (HCFSA) is a pre-tax benefit account that’s used to pay for eligible medical, dental, and vision care expenses that are not covered by your health care plan or elsewhere. With an HCFSA, you use pre-tax dollars to pay for qualified out-of-pocket health care expenses. The money you contribute to an HCFSA is not subject to payroll taxes, so you end up paying less in taxes and taking home more of your paycheck. You decide how much to contribute to your HCFSA based on how much you plan to spend in the upcoming year on out-of-pocket medical, dental, and vision care expenses. Since the money allotted to your HCFSA is not subject to payroll taxes, you save an average of 30% on your eligible health care expenses. Use our savings calculator to find out how much you can save.”

As the government also explains:

“The maximum amount you can allot to an HCFSA is $3,050 (per individual) for a benefit period and the minimum is $100. The total election amount is available on day one of your plan year. After you’re enrolled, your funds are withdrawn automatically from each paycheck for deposit into your account before taxes are deducted.”

Here’s the major catch about these accounts: They allow some year-to-year carryover of unspent sums saved. But if you’ve neglected to spend down the money you have set aside, you can see it vaporized — it goes back to your employer. As the federal government explains on one of its health care insurance sites:

“You generally must use the money in an FSA within the plan year. But your employer may offer one of 2 options: It can provide a ‘grace period’ of up to 2 ½ extra months to use the money in your FSA. It can allow you to carry over up to $610 per year to use in the following year. Your employer doesn’t have to offer these options. If it does, it can be either one of these options, but not both. At the end of the year or grace period, you lose any money left over in your FSA. Don’t put more money in your FSA than you think you’ll spend within a year on things like copayments, coinsurance, drugs, and other allowed health care costs.”

The sums relinquished from unspent health accounts can be sizable, Money magazine has reported:

“Flexible spending account (FSA) holders forfeited an estimated total of $7.2 billion in 2019 and 2020, a much higher amount than previously estimated, according to new data obtained and exclusively analyzed by Money … More than 40% of workers with FSAs forfeited at least part of their account contributions in recent years, according to new data that the nonprofit Employee Benefit Research Institute (EBRI) shared with Money. On average, they lost between $339 and $408 a year by not using up all of their FSA money by the spending deadline. All that forfeited FSA money isn’t tracked closely by the federal government, and it’s likely those billions of forfeited dollars ended up going right back into employers’ pockets.”

Record-keeping is a must when dealing with FSAs, especially because you likely will need to submit evidence of an eligible expense to your employer to get reimbursed via your health account.

But a wide variety of items and services qualify for your spending of FSA sums, including dental work, orthodontic care, eye care (glasses, contact lenses, exams, and prescriptions), as well as an array of over-the-counter drugs and goods (aspirin, bandages, first aid kits, allergy creams, and more). If in doubt, buzz the Human Resources folks at your workplace or you can get an idea by looking at web sites, such as this one (click here) posted by the large benefits’ company WageWorks.

By the way, folks try to use their health accounts to cover some, um, interesting goods and services — not always successfully, depending on how unusual the expense.

Patients may struggle to get last-minute, end-of-year appointments with their doctors of all different kinds, dentists, eye specialists, and other health providers. They are still catching up with appointments canceled or delayed due to the pandemic, or, as in the case of, say, pediatricians, they may be dealing with an onslaught of winter 2022 respiratory infections. Still, it’s worth giving them a call to see what’s available and to spend down FSA accounts, so your savings don’t go for naught. With young folks also having varied and sometimes extensive holidays upcoming, it also may be that their more flexible schedules will get them in for covered health care.

In my practice, I see not only the harms that patients suffer while seeking medical services, but also their struggles to access and afford safe, efficient, and excellent health care. This has become an ordeal due to the skyrocketing cost, complexity, and uncertainty of treatments and prescription medications, too many of which turn out to be dangerous drugs.

We all would wish it otherwise, but to cope with the current U.S. health care system regular folks must stay informed, stay atop their beneficial options, and, alas, to always work at ensuring they get the best resources available to them at the most reasonable cost. Your FSA review also may be timely, as you consider at this time of year what your 2023 coverage should look like during “open enrollment” season. If your finances allow, you also may want to talk to your accountant, financial advisor, or lawyer about a different kind of option for coping with the extremes of paying for health care, notably high-deductible insurance plans — a tax-advantaged Health Savings Account. These are different from FSAs and require some savvy because they also can be a kind of financial investment. If time allows, the savvy will be scrutinizing a stash of receipts to see if they add up enough for a 2022 medical expenses tax deduction.

Here’s hoping you find the best financial fit you can, as we all have much work to do to ensure that our health care is affordable, safe, accessible, efficient, and excellent.

Patrick Malone & Associates, P.C. listed in Best Lawyers Rated by Super Lawyers Patrick A. Malone
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