It's the most wonderful time of the year … for pharmacies and doctors.
Year end is when people scramble to spend down their workplace medical flexible savings accounts, usually referred to as FSAs.
Allen's Drug Store, Miami, Fla., photo by Phillip Pessar via Flickr
The owners of these popular — and tax saving since contributions are made by direct payroll deposit before your withholidng taxes are calculated — workplace benefits must use up the money in their FSAs by the end of the benefits year, which is for most the end of the year, or forfeit any leftover money.
Some companies allow workers a two-and-a-half grace period (until March 15) to use up the prior year's FSA fund.
But it's up to each employer to decide to offer the option, so check with your HR and/or bneefits office for your FSA spending deadline.
FSA rules changes: The use-it-or-lose-it rule is still the major drawback to FSAs. But Capitol Hill has chipped away at FSA benefits in other ways over the years.
You now need a doctor's prescription for over-the-counter medications in order to get reimbursement for the expense from your workplace account.
And in 2013 you'll only be able to sock away $2,500 pre-tax dollars in an FSA under news rules put in place as part of the Patient Protection and Affordable Care Act, aka Obamacare.
From the glass half full standpoint, less money in an FSA means you won't have to worry about leaving so much in the account at year's end.
FSA rule relief? Some folks in Washington, D.C., however, want to change FSA rules to make the accounts easier for workers to use.
In June, the House passed H.R. 436 to repeal another health care act tax on medical devices, those diagnostic and treatment items ranging from thermometers and blood sugar meters to artifical joints and pacemakers.
But other provisons in H.R. 436 also would make FSAs more appealing to account owners.
The bill would allow FSAs to resume reimbursing the cost of over-the-counter drugs without the involvement of physicians, as well as let FSA owners recoup up to $500 of their unused account funds each year.
The Internal Revenue Service also has been looking into the use-it-or-lose it rule.
The tax agency indicated a willingness to consider a regulatory change to ease the use-or-lose rule and collected public comments on the issue earlier this year. We're still awaiting a decision.
In the meantime, we've got to work with the existing rules.
So if you've got money still sitting in your FSA and your benefits year ends Dec. 31, start making plans to spend it.
You've got 31 days to get a backup pair of corrective lenses (glasses or contacts), get Jimmy those braces, finally buy the first-aid kit you say you'll get every year, get a flu shot, pick up a blood pressure monitor before the in-laws arrive for the holidays and set up a chiropractor appointment for some realignment after they leave.
You also might find these items of interest:
