Why You Could Lose Your FSA Savings at the End of December
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Here's your money briefing for Friday, November 4th. I'm J.R. Whelan for The Wall Street Journal. During the pandemic, Congress allowed people enrolled in flexible spending accounts, or FSAs, to carry over their balances to the next year. That's allowed some people's unspent funds to swell. Well, a big change is coming. That carryover rule is going away.
So the higher balances mean more money is at risk of forfeiture. It's just it's critical to get into your FSA account online and look and double check what your spend down deadlines are.
And with a little under two months left in the year, that might leave some people scrambling to spend the money in their FSA accounts. Coming up, we'll talk with Wall Street Journal personal finance reporter Ashley Ebling about what you can and can't use the money for and what you need to know about your FSA in 2023. That's after the break.
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How could I lose my FSA balance at the end of December?
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If you've got a flexible spending account or FSA through your employer's benefits program, take a look at your current balance. You could be in danger of forfeiting some money that came from your paycheck if it's not spent by the end of the year. Let's bring in WSJ personal finance reporter Ashleya Ebling for more. Ashleya, thank you very much for being with us.
Nice to be here.
So, Ashleya, remind us, what do people typically use FSAs for?
The healthcare flexible spending accounts let workers set aside pre-tax money out of their paychecks to pay for a whole variety of healthcare costs. So about 16 million people have FSAs and the way they typically work is that you put the money in for the one year and you have to spend the money down that year.
Oh, so it's a use it or lose it type of thing.
That's right. The higher balances mean more money is at risk of forfeiture. So it's critical that you look to see online on your FSA account what your deadline is and that you start submitting expenses or incurring expenses if you haven't yet so you don't lose that money.
So what changes to the rules were put into effect during the pandemic?
So during the pandemic, Congress recognized that people couldn't get to the doctor necessarily, and they allowed unlimited rollovers for both 2020 and 2021 balances. So that's why people are basically stuck now. A lot of people have much higher balances than usual going into year end 2022. OK.
So how are the rules changing again?
Well, the unlimited carryover rule ends. So that means you're basically back to the old rules. And literally millions of people are facing this December 31st deadline with all this money in their accounts.
Wow. So what does that mean for people who have money sitting in their FSA account?
So the higher balances mean more money is at risk of forfeiture. It's just it's critical to get into your FSA account online and look and double check what your spend down deadlines are.
Yeah. And so how does this process work? How does somebody, for example, get reimbursed for some sort of medical spending or treatment?
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