Ask Penny: What happens to my unspent FSA funds at the end of the year?

November 19, 2020

Due to COVID-related interruptions in medical care this year, it’s likely been a struggle to maximize your FSA dollars. You can use FSA funds to pay for things like medical expenses, doctor visit copays, vision expenses, and prescriptions. But keep in mind that FSA dollars have an expiration date. If you don’t use your funds before the end of the year, you may lose them.

So what should you do if you still have 2020 FSA funds to spend? Now is the time to use your remaining contributions so you can maximize your investment in your FSA. Thankfully, there are plenty of options.

First, check your balance

Know how much you have left to spend and then develop a plan. Start with the most important potential health expenses:

  • Book doctor appointments now – If you're overdue for an annual physical or routine check-up, book now before year-end appointments fill up. If an in-person visit to the doctor's office isn't an option, telehealth expenses are also FSA eligible.
  • Schedule elective procedures and use wellness upgrades – If you have a major FSA surplus to work with, now may be the right time for that elective procedure you may have been putting off. LASIK surgery and some specialist health services are covered by your FSA. Additionally, now may be the perfect time to invest in a new pair of prescription eyeglasses or contact lenses.
  • Plan ahead for upcoming life events – If you're expecting a baby in the future, breastfeeding supplies, baby movement monitors, and more are all covered by your FSA funds. Plan ahead so you won't have to pay out-of-pocket for these health essentials later.

Many other medical and health-related expenses are FSA eligible as well. For example, over-the-counter  medicines like Advil and Benadryl, as well as feminine care products like tampons and pads became fully eligible in 2020. Consult this handy FSA Eligible Expenses Guide or use an online resource like the FSA Store to find a list of eligible items and to purchase helpful, everyday products to use up your remaining FSA balance.

If I don’t use my FSA dollars, will I lose them?

Yes, although you won’t necessarily lose all the money you saved in your FSA this year. Your employer has a few options:

Carryover

  • Applies only to healthcare FSAs
  • Allows carryover of up to $500 of unused FSA money into the next plan year
  • Employees have 90 days to file claims against their full balance for funds incurred before the plan year ends. Employees can then incur new costs up to $500 (on top of their annual election) in the next plan year.

Grace period

  • Applies to healthcare FSAs and dependent care FSAs
  • Provides a 2.5-month grace period, so employees have more time to spend their 2020 FSA dollars
  • Employees can use remaining FSA funds from the previous plan year (i.e., January 1, 2020-December 31, 2020) for 2.5 months after the plan year ends (until March 15, 2021)

Runout period

  • Applies to healthcare FSAs and dependent care FSAs
  • Provides a 90-day period following the date the plan ends to file claims for expenses incurred during that plan year. The runout period applies to terminated employees or canceled plans, in addition to the end of the plan year.
  • Employees have until March 30, 2021 to submit claims for eligible expenses that occurred January 1-December 31, 2020.

You may be granted additional time to file 2020 claims due to COVID-related deadline extensions, if your employer has amended their FSA plan document. Check with your employer to see what options above are available to you, then create a plan today to use all your 2020 FSA funds before you run out of time.