Remind employees about the FSA use-it-or-lose it deadline

Contributions to flexible savings accounts (FSAs) face the “use it or lose it” rule: Balances not spent by the deadline are forfeited by the employee. Balances used to reimburse qualified medical expenses are tax free.

Traditionally, FSA balances had to be spent by the end of the plan year (usually December 31) to avoid forfeiture. In 2005, the IRS allowed employers to extend the deadline 2½ months (usually March 15), at their option.

Employers should alert employees to the deadline for their plan. Employees also should be aware that eligible expenses are broader than many realize. A doctor’s prescription or recommendation is not required for an expenditure to be eligible. Medical expenses that can be reimbursed from an FSA include:

· nonprescription drugs

· elective noncosmetic surgery

· dental checkups and surgery

· corrective eye surgery

· flu shots

· programs and aids to stop smoking

· weight-loss programs

· co-pays, deductibles, and co-insurance payments

· prescription eyeglasses and sunglasses

Source: AIPB.ORG