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How to Maximize the Benefits of Your FSA Dollars

February 24, 2020
Flexible spending accounts (FSAs) can be a valuable employee benefit. With an FSA,
you are able to set aside up to $2,700 in pre-tax income to use for medical expenses
your health insurance might not cover. In many cases, though, you’ll lose any unspent
money at the end of the year. This means that a little planning, both at the beginning of
the year and at year’s end, can help you with spending FSA dollars.

How Does an FSA Work?

FSAs are funded through deductions from your regular paycheck. Those deductions are
taken before any taxes are withheld, so FSA dollars are available to you tax-free. You
can use your FSA to reimburse yourself for a number of uncovered medical expenses,
• Insurance copays
• Uncovered dental expenses
• Eyeglasses and contact lenses
• Hearing aids and batteries
• Health-related home renovations
• Pregnancy test kits and fertility treatments

Six Steps for FSA Success

FSAs can save you money by letting you use pre-tax dollars to pay for a number of
medical expenses. But you have to budget how much you want to deduct from your
paycheck when you make your insurance plan selection for the next year. Some plans
may allow you to roll over up to $500 of unspent funds into the next year or provide a
two-and-a-half-month grace period to use up that money. But in other cases, money you
don’t spend by the end of the year reverts back to your employer. That’s why planning
what you’ll need next year — and keeping track of how much you’ve spent this year —
is so important. Consider the following six steps to make the most of your FSA dollars
throughout the year:
Step 1 — Know your limits.
The U.S. Internal Revenue Service (IRS) sets limits for
how much FSA money taxpayers are allowed to set aside every year. For 2019, the limit
is $2,700, and it will be $2,750 for 2020. However, don’t feel you have to set aside the
maximum amount.
Step 2 — Budget wisely.
Past experience is your best resource when it comes to
planning how much to set aside in your next year’s FSA. Take a look back through your
bank records to see how much you spent on co-pays and prescriptions. Also consider
how you’ll track expenses throughout the year. You’ll need to save receipts, and submit
them for reimbursement from your employer’s human resources department.
Step 3 — Monitor your spending.
Keep track of how you use FSA dollars throughout
the year. If you still have funds available as autumn begins, consider moving up any 
medical appointments. Also think about other possible expenses you know you’ll have
over the next several months. This could include new glasses or contact lenses, or
maybe stocking up on hearing aid batteries.
Step 4 — Check your records.
Review bank records as year-end approaches to check
for expenses you haven’t yet submitted for reimbursement. It’s important to get your
paperwork in by the end of the year, or those expenses could become ineligible for
Step 5 — Understand your roll over/grace period.
Make sure you understand your
plan’s end-of-year rules. You might be able to roll some of the money you haven’t yet
spent into next year’s FSA. (If this is possible for you, be sure to take those funds into
account when planning for next year’s deductions.) Your plan might have a two-and-a-
half-month grace period if it doesn’t allow rollovers. If this is the case, understand the
plan provisions, since some grace periods only cover vision and dental expenses.
Step 6 — Shop around.
FSA funds can be used for a broad array of medical products
and devices. If you have unspent money left at the end of the year, think about using it
to stock up on items you know you’ll need over the next calendar year. Visit for ideas.
IRS, “Plan now to use Health Flexible Spending Arrangements in 2019”,