What happens to my FSA if I don't use it by December 31?

Question

Lose it? Where does it go? Back to my employer? Does Uncle Same get it?

Answer 1

Well it depends on your plan's year.  Does it run Jan 1st thru December 31st?  If it does and you haven't used all of your money, you lose the balance.  Most plans do have a grace period to file claims however, so if you occurred an expense that qualifies anytime before December 31st, you usually have up to 3 months to file claims on those expenses before you lose the balance of your account.  This is why its so important to be realistic in estimating your total contributions to your FSA ... you're better off underestimating by some and paying out of pocket for the rest, than overestimating your contributions to the point you don't use it all and lose that money come the end of the term.

Answer 2

Assuming it's a January 1st fiscal year, it's use it or lose it, baby!

Answer 3

If your plan has a grace period (January 1 to March 15), you will have that additional time to use money that you put into your FSA. This is mandated by the federal gov't, but not all plans have adopted it.

If your plan does not have a grace period, you need to use that money!  Hit the pharmacy and stock up on cold meds, first aid supplies, etc. Throughout the year, save your receipts--you'll be surprised by how many things you buy on a normal basis that are eligible for reimbursement through your FSA account. You don't have to file the claim until the end of the year, so if you need to use the money, you have time to sort through your receipts. Remember, though, that the receipts have to show the date of purchase, the name of the store, the amount paid, and the item description. Many stores now print right on the receipt whether or not something is an FSA reimbursable item.

Claims incurred by December 31 usually have to be submitted within 90 days (March 31), and the claims incurred during the grace period have to be submitted within 90 days of the end of the grace period. This 90 day window is regulated by your plan, however, so check it out.

Hopefully, you will be able to download the guide from the IRS website. It is a list of eligible OTC items. Even though this list was developed for the federal plan, it is the same that will be used for every plan, since these are items that have been approved by the IRS.