If you’ve signed up for a Flexible Spending Account (FSA) this year, you might be wondering how to get the biggest bang for your buck. Since the contributions you’re making are pre-tax, you’re already saving money on your tax bill, as well as on the out-of-pocket medical expenses for which you can use your FSA money.

But in this post we’re going to walk you through the easiest ways to use your FSA, some unexpected expenses that you can pay for using your account, as well as how to ensure you don’t lose any of your unused contributions before they expire at the end of the year. Let’s get started.

Understand FSA rules

Before you can get the most out of your FSA, you have to understand what the rules are. Because there are rules. There are rules about how much you can contribute each year, for whose expenses you can use your contributions, what you can use your contributions on, what happens to your contributions at the end of the plan year, and more. Some of these rules are set by the IRS, some are set by your employer and FSA administrator.

General FSA rules

The IRS sets the general rules for FSAs that all FSAs must abide by. The following are the important general rules that apply for to all FSAs:

1. To participate in an FSA, it must be offered as a benefit by your employer, and you must be eligible to participate in this benefit. 

2. The maximum annual contribution limit for FSAs is set by the IRS each year. However, employers can choose the limit for their employees up to the IRS maximum. 

3. If spouses are each offered an FSA through their employers, they can each participate in one and separately contribute up to the annual maximum. 

4. Expenses must be incurred during the plan year to be eligible. This includes when services were received, not when they were paid for. 

5. The IRS determines which expenses you can use your FSA contributions to pay for. This list is always expanding, so make sure to check Lively’s website and the FSA Store to see if an item you want to purchase is eligible. 

6. The IRS also determines whose expenses you can pay for using your FSA money. Eligible recipients of your FSA expenditures are: you, your spouse, your children, and any dependent adults in your care.

7. Substantiation for each expense is required by the IRS, that is every FSA dollar you spend must be verified that it’s FSA eligible. 

8. The IRS requires employers to structure their FSA plans in a way that causes employees to forfeit unused balances at the end of the plan year. The exceptions are if the employer has elected to allow employees to either rollover a certain amount to the following year’s account, or they can provide employees with a 2 ½ month grace period within which to use their unused balances. Employers can’t offer both. Check with your employer to see if they offer one of these options.

9. The IRS determines how much of their unused balance employees are allowed to rollover to the following plan year.

FSA guidelines set by your employer

Your employer has the ability to add additional rules and restrictions for the FSAs they offer beyond the IRS rules. For example, they can determine how you access your funds, whether they offer a rollover or grace period, narrow the list of eligible expenses from the IRS list, or set a maximum below the annual maximum set by the IRS. For information on your specific FSA, check your plan documents.

Your FSA administrator and employer will collaborate to determine the reimbursement process for expenses for which you use your personal credit or debit card. Before you use your personal card for an expense, make sure that you know what type of documentation you need in order to get reimbursed from your FSA.

Your FSA administrator may offer you a debit card linked to your FSA. This will allow you to pay for expenses at the time of purchase instead of paying with your personal card and waiting to get reimbursed. If your administrator offers a debit card, it will likely have certain vendors and service providers whose charges are automatically accepted. For other expenses, you might have to use your personal card and submit the expense for reimbursement.

At Lively, we offer a debit card linked to your benefit accounts. We have certain vendors and service providers like the FSA Store, for which purchases are always approved. For others you might have to submit a receipt for approval. 

At Lively, the process of submitting a receipt for reimbursement is as easy as taking a photo with your phone. All you need is a digital copy of the itemized receipt (a photo works), upload it to our mobile app or through our online portal and you’ll have your money in no time! 

How to find FSA-eligible items 

There are some FSA-eligible expenses that might seem obvious like copays, coinsurance requirements, and prescription costs. But these are just scratching the surface. Especially if you’re not someone who uses the medical system a lot, you’ll want to spend some time researching all of the possible ways you can use your FSA. That way you can decide the most advantageous ways to use your money.  

1. One of the easiest ways to find FSA-eligible expenses is to shop at the FSA Store. Everything on the site is eligible for purchase using your Lively FSA debit card so there’s no worries about whether or not the purchase will be approved. This also means you don’t need to keep track of any receipts or take any additional steps to recoup your money. 

2. Check out Lively’s exhaustive list of FSA-eligible purchases. Some items you might be surprised to find on this list include:

   • Over-the-counter acne treatments.

   • Fees for alternative medicine practitioners.

   • Alternative medicine treatments.

   • Night mouth guard.

   • Air purifier.

   • Condoms.

   • Cough drops.

   • Electrolytes.

   • Tampons.

   • Invisalign.

   • Braces.

   • Legal abortion.

   • Massage gun.

   • Morning after pill.

   • Oura ring.

   • In and out-patient rehabilitation centers.

How to get the most out of your FSA

To get the most out of your FSA, you’ll need to know the rules specific to your FSA (i.e. if your employer has restricted the eligible expenses list beyond what the IRS has determined, and if your employer allows you to rollover part of your balance or offers a grace period within which to use it). Knowing these two pieces of information can help you both time any big-ticket medical procedures for which you might incur a large out-of-pocket expense, and decide which expenses you want to use your FSA for.

In addition, you’ll want to know how much you have available to you. This number will include what you’ve planned to contribute for the year, any employer contributions and any rollovers from the previous year.

Once you have all of this information, you can strategize how best to use your tax-free money. Here are some ways you can make your money go farther.

1. See your doctor for preventative care visits. The healthier you stay, the less of your FSA money you’ll need to spend on medical treatments and care. And the more you can use it on everyday health expenses that not only keep you healthier, but that you would probably have purchased anyways.

2. Restock your first aid kit. A well-stocked first aid kid is always a good idea, but is an especially good idea for those with children of any age in the house. You can use your FSA to purchase anything you need for your first aid kit including but not limited to: band aids, gauze, rubbing alcohol, medical tape, ace bandages, braces, antiseptic spray, and more.

3. Stock up on seasonal needs. For summer that could mean sunscreen and prescription sunglasses. You can use your FSA for allergy medication in the spring, and for all those medications that will get you through the respiratory and flu-like illnesses in winter.

4. You can use your FSA to proactively take control of your health. You can use it to purchase vitamins (with a doctor’s note) and electrolytes. You can use it for comprehensive blood testing to monitor any concerning markers. You can use it for health trackers like the Oura ring. You can even use it for functional health, acupuncture, Chinese medicine, naturopathic office visits, and more.

5. Improve your skin and up your anti-aging routine. You can now use your FSA for over-the-counter acne creams and serums, acne patches and other skincare from respected brands like Elta MD.

6. Add your Lively FSA card to your Amazon account. Did you know that Amazon has its own FSA store? To make purchasing eligible items easy and checking out hassle free, add your FSA debit card to your Amazon wallet.

7. If you have an HSA and an FSA, use your FSA first since your HSA balance rolls over from year to year.

8. If your employer allows you a 2 ½ month grace period within which to use your FSA balance, schedule any big-ticket medical procedures or treatments for that grace period. Then you will get the double benefit of making progress toward that year’s deductible while using your previous year’s FSA balance to pay for the out-of-pocket expenses.

9. Refill your prescriptions before the plan year ends.

10. If you don’t have a separate dental and vision reimbursement account, use your FSA to pay for dental, orthodontia, and vision care.

11. Manage your weight. You can use your FSA to pay for behavioral weight loss programs, tracking and support apps, and even GLP-1 medications. Some FSA administrators and employers may require you to submit a letter of medical necessity in order to pay for these types of expenses using your FSA.

12. Reimburse or pay directly for medical travel. You can use your FSA to pay for travel costs associated with traveling to and coming home from receiving medical care for you or a covered dependent. 

Your FSA can be a powerful savings tool to help you pay for every day health expenses and necessary medical treatments. Since you’re contributing money to your FSA pre-tax, you save on your income tax bill and can save up to 37% on the expenses for which you use your contributions, depending on your tax bracket. To get the most out of this benefit you just need to know the rules specific to your FSA and then you can develop a strategy for the expenses you’ll pay for and the timing of those expenses. 

Get started with Lively!

If you’re ready to uplevel your benefits offerings, reach out to Lively today. We offer comprehensive benefit plans that are administered with a modern touch. Your employees will love the ease with which they can use their benefits and your staff will love how easy they are to administer. Get started with Lively. We’re here for you.