Question: I have a Flex-Spending Account how long do I have to use the money that I have in it?

Answer: In the past I have talked about Flex-Spending Accounts (FSA) and HSA (Health Savings Account) and the differences between them.

An HSA is a pre-tax way of saving money to pay for medical expenses later. The HSA is available for those individuals who have a High Deductible Health Plan (HDHP). A HSA is an account that is in your name. The money deposited into the HSA is not taxed when taken directly from your wages. You can also deposit money into this account from other sources. You are allowed to deposit a limited amount into your HSA annually, for 2023 the limit is $3850 for an individual and $7750 for a family. If you are over 55 years of age there is a catch-up contribution of $1000 annually.

A benefit to having an HSA account is the money is always yours to use towards medical expenses for you and your family. The deposits will build up over time and be used over the course of your lifetime. These accounts usually earn some amount of interest, your funds will grow if you don’t use the money immediately.

A Flex-Spending Account (FSA) is an employee benefit that allows your pre-tax wages to be put aside and used for medical spending within a fixed period of time (usually annually). The 2023 limit for contributions to an FSA is $3050.

You set your amount annually when signing up for the FSA. For example, if you decide to set aside $1000 in your flex-spending account, your FSA is front loaded by a third party. Your wages are used to repay that amount over the course of the year. If you need dental work done in January the $1000 is available immediately and it is then ‘paid back’ over the course of the year with pre-tax wages. This can be a useful way to pay large medical expenses prior to having the money. The down side about having an FSA comes at the end of the year if you have not spent the entire $1000. The balance left over in your FSA is kept by the third party who agreed to front that money initially. You usually have three to six months after the year is completed to request that money back providing proof of medical spending receipts. If that time has expired your balance will be forfeited. These two accounts are very different in a couple of basic ways. An FSA is preloaded upfront and you can pay it back over the course of the year with pre-tax dollars and without interest. In this situation if you don’t ever use the loan you were given, you still have to pay the money. The FSA also requires that you be employed to be enrolled in the FSA. You cannot establish an FSA without employment.

The HSA is a way to save money in your name for expenses in the future. If you needed dental care in January, your brand new HSA would not have much money in it to pay for that service. It takes time to save money with an HSA. One way to counteract this downside is pay the dentist in January and then use the HSA at the end of the year to pay yourself back for that expense. You simply provide receipts along with proof of payment and the HSA will pay you back the money you paid prior to having the full amount in the HSA.

This is a good time of year to think about that FSA account you have. Please review what is left in it and begin to file claims to get that unused money out of it before the end of the year. You likely have until March of next year to file for that benefit, but you may forget to do that, and you have lost your funds. If you think about this claim process now, file the claim to get the money out of it before the years end you have saved paying taxes on that income and didn’t lose any of your hard-earned money.

I will say I like HSA’s better than FSA’s but if you have an FSA I want you to get the money out of it to reimburse you for those reimbursable medical expenses, before the end of the year.

Janell Sluga is a geriatric care manager helping seniors in our community access services and insurance. To reach her, please email editorial@post-journal.com.