Tips on How to Spend Your FSA So You Don't Lose It

If you have a flexible spending account, you only have a finite amount of time to use the funds you contribute. While employers can provide grace periods and rollover options, these accounts are often "use it or lose it."

Fortunately, there are many ways to spend your FSA before that expiration date hits! But how do FSAs work, and what can you use your funds on?

How Do FSAs Work?

An FSA is an employer-sponsored benefit allowing employees to contribute pre-tax dollars with every paycheck for qualified medical expenses. There's an annual limit to how much money you can put into your account, and you can only use the funds to pay for costs outlined by the IRS.

Furthermore, those funds typically expire at the end of the year. If you don't spend them, they go back to your employer.

Spending Your FSA Funds

Spending your FSA is usually easy if you have doctor appointments, prescription medications, dental care and other services throughout the year. But if you rarely use it, you might scramble at the end of the year to avoid losing your contributions.

Here are a few ideas on what you can use leftover FSA funds for at the end of the year.

Stock Up on Essentials

Did you know you can use your FSA to buy over-the-counter products? Headache medicine, pain relievers, decongestants, antacids, menstrual products and more all count as qualified medical expenses.

Why not stock up? You can spend that last bit on products you'll likely use next year, ensuring you never run out.

Buy New Sunglasses

You can also use your FSA to pay for optometry services and products. If you have prescription lenses, consider buying a new pair of sunglasses. Pick up a new stylish pair you can use when summer rolls around!

Try a New Service

FSAs cover all your typical healthcare services like doctor's visits and specialist care. However, you can also use those funds on less traditional services like acupuncture or chiropractic services.

Try those services if you have aches and pains. It's a great way to use up your FSA funds while seeing if you like the experience.

Read a similar article about is an FSA worth it here at this page.

Can I Use My HSA for My Family Members?

The best health savings account (HSA) can do a lot to help you cover medical expenses. These accounts allow you to put aside pre-tax income up to the annual limit. You can also invest the funds in the account to get tax-deferred growth. Furthermore, you can use the money in your HSA for qualified medical expenses tax-free.

HSAs are a fantastic tool that allows you to save for medical care. Whether you use it now or wait until you have major expenses, it can make healthcare far more manageable.

One common question about HSAs is whether or not you can use HSA funds to pay for expenses incurred by family members. In this blog, we'll answer that question and clarify how you can use your HSA.

Using HSA Funds for Family

Your HSA will cover any qualified medical expense, including over-the-counter care products. As long as the expenses fall under IRS-set guidelines, you won't receive a penalty or pay taxes on that spending.

That also covers certain family members. You can use your HSA for family members, but they must be tax dependents. That means you can't use it to help out a friend or assist a sibling.

Your HSA extends to tax dependents only.

Individual vs. Family Health Plans

Confusion about HSA spending for family members often arises due to the different types of coverage you must get to open an HSA. To open an HSA, you must have a high-deductible health plan (HDHP). When you enroll in an HDHP, you can get either individual or family coverage.

Contrary to popular belief, there's no such thing as a "family" or "joint" HSA. Only one person can own an HSA. However, annual contribution limits depend on your HDHP coverage type. In 2023, the annual limit for individual health plans is $3,850 and $7,300 for family plans.

It does not matter whether you have an individual or family health plan. You can use the best health savings account to pay for eligible expenses from tax-dependent family members. What changes between individual and family HDHP health coverage is how much you can contribute to your HSA every year.

Read a similar article about the best employee benefits here at this page.

Where Can You Transfer Your HSA to?

Health savings accounts (HSAs) are a great way to save and invest money for qualified medical expenses. They offer many tax advantages and can grow with you throughout your life. Unlike flexible spending accounts (FSAs), HSAs don't expire or remain exclusive to one employer. You carry them with you throughout your career.

That said, you may want to consider doing an HSA transfer at some point. A transfer is when you switch from one HSA provider to another.

Why transfer your HSA? There are many reasons why you might consider it. If you start your HSA with a specific employer, you might want to transfer it when you change jobs. You can also move your funds to a different administrator because you prefer their investment options and fee schedule.

Whatever the case, transferring your HSA is easy. However, there are specific rules to follow.

How to Transfer Your HSA

The most important thing to know is that you can only move your HSA to a different provider once per year. There are also IRA regulations you must understand to remain compliant and avoid a surprise tax bill.

One way to move to a different HSA provider is to perform an HSA rollover. This process involves informing your current HSA administrator of your desire to close your account and move to another provider. Your original provider will then cut you a check, and it's up to you to reinvest that money with another company.

You only have 60 days to open another HSA account and transfer funds. If you don't do it within that window, the IRS will consider the move a full distribution. The amount will become taxable income, and you'll face a 20 percent penalty.

To avoid the risks of an HSA rollover, consider doing a trustee-to-trustee HSA transfer. With this method, you instruct your original HSA provider to transfer for you. The money moves from one HSA to another. You won't get a check. That's a good thing! It means there's zero risk that your transfer turns into a taxable event.

Read a similar article about HSA here at this page.

How I Invest My Health Savings Account

When Morningstar introduced a high-deductible healthcare plan with a health savings account alongside the traditional healthcare plan about a decade ago, some of my colleagues were skeptical. Even though the company provided generous incentives for selecting the high-deductible healthcare plan, they worried about shouldering the higher out-of-pocket costs that are part and parcel of high-deductible healthcare coverage. Heck, “high deductible” is right in the name! read more

Can I Use My HSA for Headache Medicine?

So you've opened one of the best HSA accounts on the market and made contributions to start saving for healthcare expenses. What can you use your health savings account (HSA) for?

These unique savings accounts are purpose-built to help you manage the cost of healthcare. They're tax-advantaged and can grow with you over time. Everything you put into the account is tax-deductible, and distributions for qualified medical expenses are tax-free. Even the interest you earn from investing in your HSA is tax-deferred.

There's a lot to gain from opening an HSA, but you don't have to wait to use it. While many people don't touch these accounts as they grow, you can start using them to reap the tax rewards. But what kinds of products can you pay for with your HSA?

Paying for Over-the-Counter Products

It's not just doctor visits and ER bills that count as qualified medical expenses. Several over-the-counter products apply, too. One common item many rely on to stay comfortable is headache medicine. There's no shortage of pain relievers like Tylenol, Ibuprofen, Advil or Excedrin to reduce symptoms and get relief.

All of those products are qualified medical expenses. You can use your HSA for headache medicine. But that's not all.

You can also use your HSA to pay for items like Epsom salts and heating pads to address bodily pain. It also covers allergy medicine, menstrual products and more!

How Do You Use an HSA for Over-the-Counter Products?

Utilizing your HSA for products at the drugstore is easier than you think. Many big-name pharmacy stores now label HSA- and FSA-eligible goods. Even online retailers have dedicated HSA and FSA stores, allowing you to find the products you need without worrying about documentation or approval.

When you pay for qualified products like headache medicine, you can use your HSA debit card like any other payment method. The best HSA accounts typically provide an easy-to-use card. When used, the funds will come out of your HSA directly. If you don't have an HSA debit card, you can request reimbursement from your provider with a receipt.

Read a similar article about HDHP strategy here at this page.

Two Ways to Increase Employee Participation in HSAs

More people today have health savings accounts (HSAs) than ever before. Recent studies show over 35.5 million Americans have an HSA, covering nearly 72 million people.

HSAs offer many tax advantages and allow people to save for future healthcare costs. Research suggests that HSA account holders are more strategic healthcare consumers and engage in greater healthcare decision-making than those who don't have one.

If you're an employer offering HSA contributions, encouraging your employees to participate can benefit their short and long-term well-being. Here's how you can improve employee HSA participation.

Education

Many argue that the reason there aren't more people who have HSAs is a lack of education. Not everyone understands the benefits of having an HSA or how it can lead to better financial and medical security in the future. One way to get more people on board is to educate them on what an HSA can do.

Communicate the benefits of these accounts and remind employees of their value. Don't limit that education to enrollment periods. Push the benefits year-round and provide ongoing resources for your team. Whether through educational pamphlets, engaging videos or in-person meetings, teaching your staff about HSAs will make them more likely to participate and contribute independently.

Offer Contribution Incentives

Here's a two-for-one strategy that can both educate and incentivize. Employers who have successful employee HSA participation play an active role in encouraging their teams to take full advantage of what these accounts offer.

For example, some companies do front-end contributions. Instead of smaller, incremental contributions throughout the year, they fund the account upfront. That could be with a single contribution during enrollment or quarterly. Either way, that front-end funding makes HSA funds accessible from the jump, making employees more likely to utilize the account for their healthcare needs.

Another option is to provide additional contributions whenever an employee takes certain actions. For instance, you can use contributions as incentives to complete wellness initiatives or do annual physicals. This tactic informs employees while giving them more reason to participate in your HSA program.

Read a similar article about health insurance calculator here at this page.

How to Rollover Your Health Savings Account

Health savings accounts (HSAs) are powerful financial tools that make planning for future medical expenses much easier. With personal and employer HSA contributions, this account can grow substantially throughout your life. The result is a sizeable nest egg with several tax advantages.

The great thing about an HSA is that it sticks with you. Unlike a flexible spending account (FSA), it's not tied to your employer. Therefore, you can roll over your HSA from one provider to the next. But how do you do it?

HSA Rollover Basics

To roll over an HSA is to move your funds between providers. There are many reasons to consider doing this.

One of the most common is to take advantage of lower expense ratios and maintenance fees. Expense ratios refer to the operating costs paid to invest your contributions. A higher expense ratio means you pay more fees for your HSA to grow. These fees are outside of additional custodial fees you might pay.

Many people also roll over their HSA to consolidate several accounts into one to simplify management. Whatever the case, you can do a rollover once every 12 months. However, there are some rules to follow.

How to Rollover Your HSA

Rolling over an HSA requires communicating with your new and existing HSA.

Contact your existing HSA and request a check or direct deposit of the funds in your HSA. After this request, your old provider will send you a lump sum including all your contributions, your employer HSA contributions and any growth up to that point. Then, you must set up another HSA with a new provider.

Here's something important to remember: You only have 60 days to deposit the funds you receive from your old HSA provider into your new HSA. If you go beyond the 60-day limit, you will face steep penalties. The IRS will levy income tax on the amount you roll over and charge a 20 percent penalty!

Fortunately, those penalties don't apply if you roll over the money within 60 days.

Another option is to request a trustee-to-trustee transfer. Many HSA providers allow you to do that online. With a trustee-to-trustee transfer, you don't have to worry about receiving a deposit or check.

Read a similar article about use HSA toward family planning here at this page.