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End of year means time to use up your flexible spending account

As the end of the year approaches, the clock is ticking for people to empty their flexible spending piggy banks, if they use the tax-free accounts to pay for out-of-pocket medical expenses.

Forgot to check your balance? Retailers are only too happy this time of year to remind people to get their eyes and teeth checked and to stock up on eligible over-the-counter drugs and other items.

An estimated 35 million people nationally take advantage of flexible spending accounts (FSAs). Under these plans, offered as a benefit by some employers, people can set aside pretax money from their paychecks to pay for certain medical expenses.

But there is a catch: You have to spend the balance by a certain time, traditionally the end of the year. And if you don't use it, you lose it.

The drill is all too familiar to Jesse Wolf, who started the year with about $1,000 in a flexible spending account.

"Invariably, the last two years, I've had to spend $300 or $400 buying glasses or something that I don't really need just to spend my money," Wolf said. "One year, I went to LensCrafters just so I could use the money up."

This year, the 37-year-old St. Petersburg writer expects to buy a year's supply of contact lenses at Dowdy Optical Mega Center, where he says the prices are better.

The optical store in northeast St. Petersburg typically sees a sales spike, starting about now, from flex spenders, as well as from people using up vision insurance benefits before they expire.

Dowdy Optical advertises that it can help customers make the most of their year-end dollars with deals like three pairs of eyeglasses for as low as $99.

"Most people probably use up a lot of it during the year for medicine or doctors and then at the end of the year, it's, 'Oh, I've got $200 left, let me go use it and get my eyes examined and get glasses,' " said owner Jane Perkinson, who appreciates the business in a month when people typically don't spend much money on themselves.

"We have some people that run it right down to the wire. They come in on New Year's Eve," she added, laughing.

The phenomenon can extend into the new year. Many employers now allow workers to take advantage of a "grace period" approved by the IRS. This extends the deadline to March 15 to use the money in flexible spending accounts, but not all employers offer it.

If you're looking to part quickly with sums large or small, look no further than your neighborhood drugstore. Many carry scores of eligible products, ranging from denture care to family planning.

To make it easy to identify the eligible items, CVS drugstores flag them on your receipts. Customers who use the store's ExtraCare card can call a toll-free number to request a list of all FSA-eligible purchases going back 14 months. The service is free and the list can be sent by mail or e-mail.

You can even shop online from home at the CVS Web site and others. Drugstore.com has a dedicated "FSA store" with about 4,000 eligible items, so customers can know exactly which products qualify. The retailer does its highest concentration of flexible spending account business from December through March 15.

Hot items include "any product that has recently gone from a prescription to an over-the-counter," said Karen Estrin, the company's marketing manager for flexible spending accounts. Prilosec, the heartburn medication, is currently a top seller.

And with the grace period, "January is a big month for FSA spending in our contact lenses business," she added, noting that new plan benefits also become available.

Still, the reality of year-end flexible spending may be less than the hype.

At WageWorks, a California-based company that administers about 1.5 million flexible spending accounts, December is the fifth-highest spending month.

"The myth is that people rush out and buy a case of Tylenol or Robitussin cough syrup," said Jody Dietel, the company's chief compliance officer. She also leads a group lobbying Congress against some of the proposed changes to the rules for these accounts under health care reform.

"People, if they are looking to use up dollars, are very thoughtful about, 'Okay what do I need to do? Susie's needed braces, maybe I should start them now. That tooth's been bothering me, maybe it's time for me to go in and take a look. Maybe I should get that crown replaced.' "

Those who do end up forfeiting money, she noted, typically lose about $85. For most people, she said, even losing that amount is outweighed by the tax savings.

Letitia Stein can be reached at lstein@sptimes.com or (813) 226-3322. For more health news, visit www.tampabay.com/health.

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Eligible expenses

. Eyeglasses and
contact lenses

. Over-the-counter
medications (pain
relievers, cough syrup, etc.)

. Home medical equipment (blood pressure monitor, thermometers)

. Knee supports and braces

. Family planning
(condoms, fertility tests)

. Prenatal vitamins

. Acne remedies

. Nicotine gum and patches

. Incontinence products

. Baby care items (diaper rash cream, teething gel)

Noneligible

. Teeth-whitening items, dental floss, toothpaste, toothbrushes

. Hair-removal creams or waxes

. Cosmetics (face creams, lotions)

. Cotton balls, swabs, Q-tips

. Personal hygiene products (deodorants, tampons, soaps)

. Stimulants (caffeine pills, NoDoz)

Sources: Ceridian, Aetna, United Healthcare

Flexible spending account changes proposed

The health care reform legislation under consideration in Congress would limit to $2,500 per year the amount of pretax money you can set aside in an FSA account for medical expenses. Other proposed changes would limit how freely the money can be spent on over-the-counter medications and other products.

End of year means time to use up your flexible spending account 12/12/09 [Last modified: Saturday, December 12, 2009 9:36pm]

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