Eyewear, care perfect option for expiring FSA dollars.

FSA ‘use-or-lose’ clock ticking away

Spending as a means of saving? Sounds counterintuitive, except when it comes to flexible spending accounts (FSAs) and the veritable run on qualified health expenses before year's end.

"Aside from the obvious tax benefits, patients are incentivized to use the account for needed care in a timely fashion."

Around for nearly three decades, the tax-advantaged FSA health program allows people to sock away up to $2,600 yearly ($2,650 in 2018) to pay out-of-pocket expenses or other health care-related costs, such as glasses or contact lenses. By design, FSA money can only be used within the plan year, otherwise that unused money is forfeited back to employers.

However, not everyone is so quick to spend those unused dollars. In fact, the average FSA account holder forfeits $50 to $100, per reports. Although some FSA plans offer a rollover option or a grace period that prolongs the inevitable forfeiture of funds, many FSA holders will be looking to make the most of their savings before 2018-and eye care remains a popular option.

'Use-it-or-lose-it' spurs timely care

Many use FSAs to pay for comprehensive eye examinations, or purchase contact lenses or glasses, while the FSA's time element alone provides a tangible reminder to seek routine eye and vision care. So, too, FSAs tend to be utilized for care that may not be fully covered by the patient's regular health insurance.

"Aside from the obvious tax benefits, patients are incentivized to use the account for needed care in a timely fashion," said Steven A. Loomis, O.D., AOA past-president. "Without that incentive, patients tend to procrastinate essential care, defeating the very purpose of the FSA."

The AOA previously stressed to the Treasury Department and Internal Revenue Service (IRS) that eliminating the use-or-lose rule altogether would undoubtedly lead to less primary and preventive eye and vision care, and, in turn, higher costs for employers and employees due to missed opportunities for early diagnosis and treatment.

The provision came under scrutiny in 2012-13, but regulators opted to allow a $500 rollover option for FSA funds into the next year. That solution strikes a balance between consumer flexibility and the goal of encouraging routine care.

Click here for more information about FSAs.

December 13, 2017

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