The clock is ticking on FSA funds

Time is running out on flexible spending account (FSA) funds for your employees, as the common December 31 “use-it-or-lose-it” deadline returns this year. It brings with it employee confusion about how much they have to spend, how much (if anything) they can carry over into 2023, and how to use the remaining dollars.

Adding to the normal FSA deadline confusion is the fact that employees may have leftover funds from 2021 and potentially 2022 that need to be spent before December 31.

 With FSA balances projected to be 46% higher than they were a year ago, potential forfeitures could far exceed the estimated $1 billion in lost funds from 2021. Unfortunately, employees don’t know what they don’t know, which means they could be unknowingly sitting on more FSA dollars than ever before. Even employees who are aware of their balance may be hard-pressed to find ways to spend down their balance, outside of traditional expenses like dental and vision care.

Here are three ways your HR team can help:

Communicate basics of company-sponsored FSA

Inform employees about your company’s FSA deadline, if you offer a carryover (and if so, how much employees can carry over), and if you offer a grace period. In addition, provide easy access to your FSA administrator and account portal, and explain to employees exactly how to check their balance for both 2021 and 2022, as they may have funds from both years left to spend.

Demonstrate connection between FSA and your health benefits

As an HR professional, you have invested time and resources into building a portfolio of employee benefits that’s designed to attract and keep top talent, while helping to keep employees healthy, happy and productive. But your employees likely don’t realize that they can use these funds to support and extend their health benefits.

For example, if your company can’t offer onsite flu shots, remind employees that vaccines for tough viruses like respiratory syncytial virus (RSV) and influenza are FSA eligible, as are over-the-counter (OTC) medications to treat fever and cough (and don’t forget masks and hand sanitizer to stop the spread of germs).

An FSA can pay for any orthodontic expenses not covered by dental insurance, such as traditional metal braces and invisible aligners (employees should check with their administrator if they choose to pre-pay). Employees can pay for visits to mental health providers, prescription medications to treat conditions like depression, and select devices to ease anxiety, support relaxation and mindfulness, and improve sleep.

Another popular benefit that your company-sponsored FSA can support is fertility or family planning benefits. For example, fertility treatments, fertility monitors, and pregnancy tests are all eligible, as are birth control and contraceptives.

Help employees save on everyday expenses

Health-E Commerce estimates that the average family spends $1,600 each year on products that could be purchased with tax-free FSA dollars. That’s a lot of money, especially as employees are being hit with sustained inflation and rising prices across the board.

Help employees stretch their FSA dollars by understanding the breadth of eligibility with a searchable eligibility list that allows them to quickly and easily find products and clinical services that meet their health needs and lifestyle. For example, you and your employees will likely be surprised to learn that the top FSA purchases of 2022 included everyday items, like high-end sunscreens and lotions; devices to treat muscle pain like weighted heating pads; and over-the-counter (OTC) medications like allergy relief, ibuprofen, acetaminophen, and cold medicine

Employee health can also benefit from using remaining FSA funds to purchase specialty, and surprisingly eligible items including a wide variety of breast pumps; deep muscle and joint relief massagers; genetic health testing kits; connected diagnostic and wellness devices; light therapy devices to treat acne and to heal gums; and devices to relieve back pain and provide support for a healthy posture.

By educating your workforce about the 2022 FSA deadline and how to use their account, your HR team will not only reduce forfeitures, but you will be contributing to a positive experience for your employees and their dependents, and increasing satisfaction with your overall benefits program. It’s the perfect win-win to round out the year.