Chapter 1: What is an FSA?

What is an FSA?

An FSA, or Flexible Spending Account, is a savings account that allows employees to set aside a portion of their paycheck to cover eligible medical expenses, which, in turn, are not taxed. For instance, an employee earning $75,000 annually could set aside $2,000 in their FSA, reducing their taxable income to $73,000. The $2,000 set aside can be used directly for FSA-eligible products and services. By using these tax-free dollars, individuals can pay for a wide range of healthcare costs, including, but not limited to medical, dental, vision care, and skincare. Thousands of FSA eligible products can be purchased at retailers such as Amazon, Costco, CVS, and Target just to name a few. Many people often associate FSAs solely with services, unaware that thousands of everyday expenses they already purchase are also eligible. 

Why do we have an FSA?

The United States government found that Americans are spending more than $600b a year on out of pocket healthcare expenses. This translates to about $1,600 per person. Of that total cost, around $400 are spent on FSA eligible products, around $800 on insurance co-pays, and around $400 on out-of-network expenses like chiropractor or counseling services. The expected out of pocket expenses for a family of 3 in the US is close to $5,000.

To help reduce the impact of healthcare expenses, the IRS (Internal Revenue Service) created a few supporting programs, one of which is the FSA program. This program allows Americans to set aside money from their salary for healthcare expenses, which are not taxed. These funds can be used on thousands of eligible FSA products and services, many of which people may not realize are eligible.

Why do employees opt out of an FSA?

During open enrollment, many employees either aren't aware of what an FSA is or choose to opt out because they don't recognize its value. Additionally, some employees who have used FSAs in the past may have had negative experiences, such as not getting enough value or losing unused funds due to the "use-it-or-lose-it" rule. This is likely one of the most common reasons employees shy away from FSAs. However, FSAs are crucial for saving money, and most people should consider enrolling. By using pre-tax money for eligible healthcare expenses, employees can reduce their taxable income and save money overall. FSAs offer a valuable opportunity to purchase a wide range of healthcare products and services while paying less in taxes. Understanding how to effectively manage an FSA can help avoid previous pitfalls and ensure that employees maximize their savings.

How does an FSA work?

An employer is enabling their employees to open an FSA through an FSA provider, also known as a Trusted Third Party (TPA). Once a year, usually two months before the benefit year starts, an employee can choose to open an FSA during the open enrollment period. If they opt in, they decide how much of their salary to contribute to the FSA. This amount, capped at $3,200 by U.S. regulations, is deducted from their paycheck before taxes throughout the year. These set-aside funds can be used for a variety of FSA-eligible products and services, such as personal hygiene items, over-the-counter medications, and counseling services purchased during the year.

Usually, the TPA will send the employee a dedicated debit card that can be used to pay for eligible expenses directly from the FSA funds. This card has a special ID that is recognized by retailers and providers who sell FSA eligible products and services. For example, your dentist probably accesses the TPA debit card, but your barber will not.

An alternative option for using FSA funds, is by purchasing products and services through any other means (like your personal CC), and filing a claim with an itemized receipt through the TPA website. The TPA will then review the claim and substantiate a reimbursement if the items submitted are eligible. 

Silver automates the entire process, from finding eligible expenses to claiming your reimbursements. By logging into your retail accounts, Silver scans all existing purchases for FSA eligibility, automatically creates the claim, and submits it to the employee's TPA provider. 

How do you Calculate your Expected Savings?

In order to calculate how much money you can save if you have an FSA…

1. Decide how much you will contribute to your FSA “up to the maximum limit set by the IRS, which is $3,200 for 2024”.
2. Determine your tax bracket. FSA contributions are not subject to federal income tax, state tax, Social Security tax, or Medicare (FICA) tax.

To further explain, here is an example…

Annual Contribution to FSA: $2,500

Tax Bracket: 22% Federal, 7.65% Social Security and 0.5%Medicare (FICA), and 6% state

Tax Savings:

$2,500 * (22% + 7.65% + 1.45% + 6%) = $2,500 * 0.371 = $927.50 “every year”

What are important FSA terms and policies you should be familiar with?

• Use-It-or-Lose-It Rule: Any unused funds in your FSA at the end of the plan year may be forfeited unless your plan offers a grace period or carryover option.
• Runout Policy: The FSA runout policy provides employees a specific period, usually 90 days after the plan year ends, to submit claims for expenses incurred during that plan year. During this runout period, employees can submit receipts and documentation for reimbursement of eligible expenses incurred before the end of the plan year. This period does not apply to new expenses incurred after the plan year ends.
• Grace Period: Some plans offer a grace period of up to 2.5 months after the plan year ends to use the remaining funds.
• Carryover Option: Some plans allow you to carry over up to $610 (as of 2024) of unused funds to the next plan year.

It is important to note that employers can offer a Grace Period, or a Carryover Option, but no plan can offer both.

• Eligible Expenses: Make sure you are familiar with the expenses covered by your FSA. The IRS offers resources to help determine FSA-eligibility and Silver provides multiple lists of eligible expenses.
• Letter of Medical Necessity: A letter of medical necessity is needed when you are seeking reimbursement from your FSA for products or services that are not typically covered as standard eligible expenses. These might include items or treatments that are generally considered non-essential, such as massage therapy, specialized equipment, dietary supplements, or cosmetic procedures. The letter helps to demonstrate that these expenses are required for the treatment of a specific medical condition, thereby qualifying them for FSA reimbursement. 

What are common questions about FSA?

1. What expenses are eligible for FSA reimbursement?

There are thousands of products and services that are FSA eligible. Some common eligible expenses are sunscreen, prescription glasses, contraceptives, acne treatments, and tampons. For more information on eligible expenses, check out these resources on Silver’s resources page.

2. Can I use my FSA funds for my spouse and dependents?

Yes, FSA funds can be used to pay for eligible medical expenses for your spouse and dependents, as long as they qualify as dependents on your tax return.

3. What happens if I don’t use all the money in my FSA?

Depending on your employer's plan, unused funds may be forfeited at the end of the plan year (use-it-or-lose-it rule). However, some plans offer a grace period of up to 2.5 months or allow you to carry over up to $610 to the next plan year.

4. Can I change my FSA contribution amount during the year?

Generally, you can only change your contribution amount during the open enrollment period or if you experience a qualifying life event, such as marriage, divorce, birth or adoption of a child, or a change in employment status.

5. How do I submit a claim for reimbursement?

To submit a claim, you generally need to fill out a claim form and provide receipts or other documentation of the expenses. However, with Silver, the process is much simpler. Just log in to your accounts such as Amazon, Costco, and CVS, and Silver will scan your purchases, identify your FSA-eligible expenses, compile the claim, and submit it to your provider on your behalf, eliminating the hassle of tracking down individual receipts.

6. Is there a limit to how much I can contribute to my FSA?

Yes, the IRS sets annual contribution limits for FSAs. For 2024, the limit is $3,200.

7. Can I use my FSA for over-the-counter medications?

Yes, over-the-counter medications are eligible for reimbursement without a prescription. This also includes menstrual care products. 

8. What is the difference between an FSA and an HSA?

An FSA is typically offered by employers and must be used within the plan year (with some exceptions). An HSA is tied to a high-deductible health plan (HDHP) and allows funds to roll over year to year, with additional investment options.

9. Can I have both an FSA and an HSA?

Generally, you cannot have a standard FSA and an HSA simultaneously. However, you can have a limited-purpose FSA (LPFSA), which only covers dental and vision expenses, alongside an HSA.

10. Are there any penalties for using FSA funds for ineligible expenses?

Yes, if you use FSA funds for ineligible expenses, the amount must be included as taxable income, and you may be subject to additional penalties.

11. Do I have to keep receipts for FSA expenses?

Traditionally, keeping receipts for FSA-eligible expenses is essential. However, with Silver, this is no longer necessary. Simply log in to your accounts, and Silver will handle the rest, tracking and submitting your FSA claims on your behalf.

12. What is an FSA card and how does it work?

An FSA card is a debit card linked to your Flexible Spending Account (FSA) that allows you to directly access your FSA funds to pay for eligible healthcare expenses.When you enroll in an FSA, your employer or FSA administrator provides you with an FSA card. You can activate the card following the instructions provided, similar to any standard debit card. When you incur eligible healthcare expenses, you can use the FSA card to pay at the point of sale, such as pharmacies, doctor's offices, or approved retail stores. The card automatically deducts the amount from your FSA balance.The card can only be used for expenses that qualify under FSA guidelines, such as medical copays, prescriptions, dental care, and other approved healthcare products and services. Many FSA cards are programmed to work only at approved merchants and for eligible expenses, reducing the need for manual claims submission. Although the card streamlines the payment process, you should keep receipts and documentation of your purchases in case the FSA administrator requests proof that the expenses are eligible. The card will only allow you to spend up to the current balance in your FSA. Additionally, there may be a daily transaction limit depending on the plan's rules.

13. How can I check my FSA balance?

You can check your FSA balance by logging into your account on your FSA administrator’s website or app, or by calling the customer service number provided by your FSA administrator.

14. What if I leave my job?

If you leave your job, your FSA generally ends on your last day of benefits from your employer. This means you can only use your FSA funds for expenses incurred while you were still employed. However, unless you elect COBRA continuation coverage for your FSA, you won't be able to use any remaining funds for expenses incurred after your employment ends. Understanding this timeline is crucial to ensure you maximize the use of your FSA before your coverage expires.

15. Can I roll over unused FSA funds to the next year?

Some plans allow a carryover of up to $610 of unused funds to the next plan year. Alternatively, some plans may offer a grace period of up to 2.5 months to use the remaining funds. Check with your employer for specific details.

16. How does the FSA grace period work?

The grace period allows you to use funds from the previous plan year to pay for eligible expenses incurred during the first 2.5 months of the new plan year.

17. What are the pros and cons of having an FSA?

Having an FSA offers several advantages. One of the primary benefits is tax savings. Contributions to an FSA are made with pre-tax dollars, which reduces your taxable income and, consequently, your federal income tax, Social Security tax, Medicare tax, and potentially state tax. This immediate reduction in taxable income translates into significant savings. Additionally, FSAs provide immediate access to the full annual contribution amount at the start of the plan year, even though you fund it gradually through payroll deductions. This can be particularly helpful for managing large or unexpected medical expenses. FSAs also cover a wide range of eligible healthcare expenses, including copays, prescriptions, medical devices, and some over-the-counter items. Many plans offer FSA debit cards, which simplify paying for these expenses and reduce the need for reimbursement paperwork. Furthermore, some employers contribute to employees' FSAs, adding to your savings and making healthcare costs more manageable.

However, there are some drawbacks to consider. One significant con is the "use-it-or-lose-it" rule, where funds not used by the end of the plan year are forfeited, although some plans offer a grace period or limited carryover options. The IRS sets an annual contribution limit ($3,200 for 2024), which may not cover all your healthcare expenses. Additionally, there can be an administrative hassle involved, as you may need to submit receipts and documentation for reimbursement, and not all expenses are automatically covered. Another potential drawback is the restriction on changing contribution amounts mid-year unless you experience a qualifying life event. FSAs are also tied to your employer, so if you change jobs, you may lose access to your FSA and any remaining funds. Finally, not all healthcare expenses are eligible for FSA coverage, so you need to be aware of what qualifies to maximize your benefits.

In conclusion, having an FSA provides substantial tax savings and convenience for managing healthcare expenses, but it also necessitates careful planning and awareness of the rules to avoid losing unused funds. Silver simplifies the reimbursement process by automatically determining FSA-eligible expenses and eliminating the need to keep receipts, making it much easier for employees to maximize their benefits.

Chapter 2: What is FSA eligible from your spending?

What is an FSA eligible product?

An FSA (Flexible Spending Account) eligible product is an item or service that can be purchased using funds from an FSA account, which allows individuals to set aside pre-tax money for qualified healthcare expenses. These products and services must be primarily for medical purposes to qualify. 

What are some common categories of FSA eligible products?

Over-the-counter medications, medical supplies and equipment, personal health items, wellness products, preventative care and family planning products, medical services, and mental health services are some eligible categories containing products and services that can be used with an FSA. To learn more about the different FSA eligible products, common and not so common, check out this link to read more.  

How does Silver determine what is FSA Eligible on my accounts?

Silver boasts a comprehensive database of tens of thousands of FSA-eligible products. Our advanced detection system accurately identifies each qualifying item, even those not explicitly marked as FSA-eligible by sellers like Amazon and Walmart. With Silver, you can confidently ensure that all your eligible purchases are recognized and maximized for FSA benefits.

Which over-the-counter medications are eligible for my FSA?

Common over-the-counter (OTC) medications that are FSA-eligible include a variety of products used for everyday health concerns. These typically include pain relievers like ibuprofen and acetaminophen, which are widely used for headaches, muscle aches, and other minor pains. Allergy medications such as antihistamines are also eligible, providing relief from seasonal allergies and other allergic reactions. Cold remedies, including decongestants, cough syrups, and throat lozenges, are commonly covered as well, helping to manage symptoms of colds and flu. While most OTC medications are FSA-eligible without additional documentation, some items may require a prescription or a Letter of Medical Necessity (LMN) from a healthcare provider to qualify for reimbursement. It's essential to check with your FSA administrator to understand the specific documentation requirements for your purchases.

What is a Letter of Medical Necessity and how do I use it for FSA?

A Letter of Medical Necessity (LMN) is a document written by a healthcare provider that confirms a specific product, service, or treatment is necessary for the diagnosis, treatment, or prevention of a medical condition. This letter is often required by FSA administrators to verify that an expense qualifies for reimbursement under your FSA. 

What Medical Supplies and Equipment Can I Buy with My FSA?

With your FSA, you can purchase a wide range of essential medical supplies and durable medical equipment to support your health and well-being. Eligible items include basic necessities like bandages, first aid kits, and thermometers, which are crucial for managing minor injuries and monitoring your health at home. Additionally, your FSA can cover the cost of durable medical equipment, which includes larger, more specialized items such as crutches, wheelchairs, and blood pressure monitors. These devices are vital for individuals recovering from surgery, managing chronic conditions, or needing mobility assistance. By using FSA funds for these purchases, you can ensure that your healthcare needs are met with minimal out-of-pocket costs, providing peace of mind and financial relief.

Can I Use My FSA for Eyeglasses, Contact Lenses, and Hearing Aids?

Your FSA can be a valuable resource for covering the costs of essential vision care products and hearing aids, helping you manage the expenses associated with maintaining your sight and hearing. Prescription eyeglasses and contact lenses are fully eligible for FSA reimbursement, allowing you to choose the corrective eyewear you need without the financial strain. Additionally, lens solutions and other related accessories, which are necessary for maintaining your contact lenses, are also covered. For those with hearing impairments, FSAs can be used to purchase hearing aids and the necessary batteries or accessories to ensure they function optimally. This coverage extends to both the initial purchase of hearing aids and any necessary maintenance, ensuring you have access to the tools needed to enhance your quality of life.

Are Sunscreen, Acne Treatments, and Smoking Cessation Products Covered by My FSA?

Your FSA can help you take care of your skin and overall health by covering a variety of essential products. Sunscreen with an SPF of 15 or higher is FSA-eligible, making it easier to protect your skin from harmful UV rays while reducing the risk of sunburn and long-term skin damage. In addition to sun protection, FSAs also cover certain skincare products like acne treatments, which are vital for managing and preventing breakouts. For those looking to quit smoking, FSA funds can be used to purchase smoking cessation products, such as nicotine patches, which provide support during the process of quitting. These eligible items not only contribute to healthier skin but also support your broader health and wellness goals, all while making the most of your FSA benefits.

Which Preventive Care Services and Screenings Are FSA-Eligible?

Your FSA can be a crucial tool in maintaining your health by covering a wide range of vaccinations and health screenings, as well as preventive medications. Vaccinations, such as those for flu, tetanus, and other common illnesses, are fully eligible for FSA reimbursement, allowing you to stay protected without worrying about out-of-pocket costs. Regular health screenings, including blood tests, cholesterol checks, and mammograms, are also covered, ensuring you can monitor your health and catch potential issues early. For those planning or currently experiencing pregnancy, FSA funds can be used to purchase prenatal vitamins, which are essential for the health of both mother and baby. Additionally, other preventive medications, prescribed to ward off illness or manage chronic conditions, are eligible. These FSA-covered products and services enable you to take proactive steps in safeguarding your health and well-being.

How Can My FSA Help with Family Planning and Maternity Expenses?

Your FSA can be a valuable resource during the journey of pregnancy and parenthood, covering a variety of essential products. For those trying to conceive, eligible items include pregnancy tests, fertility monitors, and ovulation kits, all of which can help you track and manage your fertility with greater ease. Once pregnancy is confirmed and you transition into parenthood, your FSA also covers a wide range of breastfeeding supplies. This includes breast pumps, which are crucial for expressing milk, as well as storage bags, nursing pads, and other accessories that support breastfeeding. These products are designed to make the breastfeeding process more manageable and comfortable, ensuring that you have the tools you need during this important time—all while utilizing your FSA to reduce out-of-pocket expenses.

What Medical and Dental Services Are Covered by My FSA?

Your FSA can help manage the costs associated with routine healthcare, including doctor visits and dental care. Most medical appointments, such as those with your primary care physician, specialists, or for mental health counseling, are eligible for FSA reimbursement. This includes the co-pays you pay at the time of your visit, as well as any related out-of-pocket expenses that aren't covered by your insurance. Additionally, your FSA can be used for a wide range of dental care services. Routine cleanings, necessary fillings, and even more specialized treatments like orthodontics (braces) are all covered. Whether you're maintaining your overall health through regular doctor visits or keeping your smile healthy with consistent dental care, your FSA provides a convenient way to manage these expenses.

Can I Use My FSA for Vision and Hearing Services?

Your FSA can be used to cover a variety of essential vision and hearing services, helping you maintain your sight and hearing without the financial burden. Vision exams, which are crucial for detecting changes in your eyesight and ensuring your prescription is up to date, are fully eligible for FSA reimbursement. This also includes any follow-up treatments or procedures recommended by your eye care professional, such as corrective surgery like LASIK. On the hearing side, audiology services are also covered by your FSA. This includes routine hearing tests to assess your hearing ability, as well as any necessary treatments or devices prescribed by your audiologist. Whether you're managing your eye health or addressing hearing concerns, your FSA offers valuable support in covering these important healthcare services.

Are Mental Health Services Eligible for FSA Reimbursement?

Your FSA provides important support for mental health care by covering a variety of counseling and therapy services. Eligible mental health services include individual counseling sessions, where you can work one-on-one with a therapist to address personal challenges, as well as family counseling, which helps families navigate issues together in a supportive environment. These services are critical for maintaining emotional well-being and are fully reimbursable through your FSA. Additionally, psychiatric services are also eligible, encompassing psychiatric evaluations, which are essential for diagnosing mental health conditions, and subsequent treatments, including medication management and therapy sessions. Whether you're seeking help for yourself or your family, or require psychiatric care, your FSA helps make mental health support more accessible and affordable.

What Specialty Medical Services Are FSA-Eligible and What Documentation Do I Need?

Your FSA can be used to cover a range of specialty medical services that are essential for managing specific health conditions or improving overall well-being. Services like chiropractic care, which focuses on spinal health and musculoskeletal issues, are eligible for FSA reimbursement. Acupuncture, a traditional Chinese medicine practice used for pain relief and various other conditions, is also covered. Physical therapy, often prescribed for rehabilitation after an injury or surgery, is another service that can be paid for with FSA funds. These specialty services can play a crucial role in maintaining your health, and your FSA helps make them more affordable.

To ensure that these services are eligible for reimbursement, you may need to provide certain documentation, such as a Letter of Medical Necessity (LMN) from your healthcare provider, especially for treatments that are not automatically covered. When filing a claim, it’s important to include this documentation along with your receipts and any other required paperwork. Most FSA administrators allow you to submit claims online, by mail, or via fax. Be sure to follow the specific submission guidelines provided by your FSA administrator, as this will help avoid delays or denials. Keeping copies of all submitted documents for your records is also a good practice. By understanding the documentation and claims process, you can confidently manage your FSA and ensure that you are reimbursed for eligible specialty medical services.

How Can I Maximize My FSA Benefits and Stay Informed?

To make the most of your FSA, it's essential to plan and track your expenses throughout the year. Start by estimating your annual healthcare costs, including routine doctor visits, prescriptions, and any anticipated medical procedures. Contributing an appropriate amount to your FSA based on this estimate will help you maximize your tax savings without leaving funds unspent. Keep a detailed record of your healthcare purchases and receipts, and periodically review your FSA balance to ensure you're on track to use your funds before the year's end. It's also helpful to prioritize spending on items or services that are essential but often overlooked, such as preventive care, medical supplies, or specialty treatments.

Staying informed about FSA rules and guidelines is crucial for maximizing your benefits. FSA regulations can change, so it's important to keep up with the latest updates. Regularly check with your FSA plan administrator or HR department for any changes that may affect your eligible expenses or claims process. If you have specific questions about what is covered, don't hesitate to ask your plan administrator for clarification. By staying informed and proactive, you can make the most of your FSA and ensure you're taking full advantage of the financial benefits it offers.

Chapter 3: How Much Should You Contribute?

How should I decide my FSA contribution amount?

Flexible Spending Accounts (FSAs) require careful planning due to their "use-it-or-lose-it" nature, where unspent funds are forfeited at the end of the plan year. To avoid losing money, individuals should take a deliberate approach to determining their FSA contributions. While there are various tools available to estimate expenses, these tools are based on statistical models and may not fully prevent potential losses. A more effective strategy involves reviewing actual past expenses, which can be divided into three main categories: copays and deductibles, eligible products, and out-of-network services. By analyzing these historical costs, individuals can make more informed decisions about how much to contribute to their FSAs, minimizing the risk of losing unused funds. Additionally, many FSA programs offer a rollover option for a small portion of unspent funds, further reducing the potential for loss.

In the event of job loss, it’s essential to promptly address the financial implications of an FSA. Because FSAs are linked to your employment and insurance coverage, losing your job could result in the forfeiture of any remaining FSA funds unless they are spent quickly. This urgency underscores the importance of being proactive about managing FSA funds, especially when employment status changes. Tools like Silver can help streamline this process, enabling you to efficiently spend your remaining FSA funds before your insurance coverage ends, thereby avoiding unnecessary financial loss during an already challenging time.

Is there a minimum contribution amount?

Yes, you can contribute a minimum of $120 ($10 per month) up to a maximum of $3,200 (as of 2024) per calendar year.

What should I do with my FSA funds if I am laid off?

After being laid off, it’s crucial to act quickly to manage your Flexible Spending Account (FSA) funds due to the imminent end of your healthcare and FSA benefits, which typically last until the end of the month of your layoff. Any expenses incurred after this date are not eligible for reimbursement, making it essential to use your FSA funds before the benefit period expires. Additionally, you have a short runout period—ranging from 15 to 90 days—after your benefits end to submit claims for eligible expenses. Failure to use the funds within this period results in the forfeiture of any remaining balance, as FSA rules generally do not allow for fund rollover. Therefore, it’s vital to maximize the use of your pre-tax healthcare dollars promptly to avoid losing your FSA funds.

How can I maximize the use of my FSA funds after being laid off?

After being laid off, it's important to understand how to make the most of your FSA funds before they expire. First, confirm the exact end date of your healthcare benefits with your former employer, as this determines the deadline for incurring eligible expenses. Remember, your entire FSA contribution for the year is available for use, even if you were laid off mid-year. If you opt for COBRA continuation coverage, you might be able to extend your FSA usage, so check the specifics with your plan administrator. Be aware that only expenses incurred before your coverage ends are eligible for reimbursement. Silver can assist in quickly identifying these eligible expenses, ensuring you maximize your FSA funds before they are forfeited.

How can Silver make it easier to manage and spend my FSA funds after a layoff?

Silver simplifies the process of managing your FSA funds during the critical period following a layoff. By automatically connecting to your accounts at major retailers like Amazon, Costco, and Target, Silver collects all relevant receipts and identifies FSA-eligible expenses. This includes a wide range of items, from medical supplies to over-the-counter medications. Once these eligible expenses are identified, Silver generates and submits the necessary claim forms directly to your FSA provider, saving you the hassle of manual paperwork. Additionally, if you still have FSA funds remaining after past expenses are reimbursed, Silver guides you on making new purchases and submitting these for reimbursement. The app also handles non-retail purchases by allowing you to forward receipts from healthcare providers for easy reimbursement. Designed to be user-friendly, Silver ensures that you can quickly and efficiently use your FSA funds, helping you avoid forfeiting any money during this challenging time.

What happens if I contribute too much to my FSA?

If you contribute more than you end up needing, most FSA plans do not allow you to roll over unused funds, meaning you risk losing the excess amount. However, some plans permit a rollover of up to $640 (as of 2024) into the next year. It’s important to confirm the rollover rules for your specific plan. To minimize the risk of losing funds, carefully estimate your expenses and consider any potential healthcare needs for the coming year.

Can I adjust my FSA contribution amount during the year?

Generally, you can only adjust your FSA contribution during the annual open enrollment period. However, certain qualifying life events, such as getting married, having a child, or losing other health coverage, may allow you to change your contribution amount outside of the open enrollment period. It's important to check with your employer’s HR department to understand what qualifies as a life event and how it impacts your FSA.

What are some common expenses that people forget to include when deciding their FSA contribution?

Many people forget to account for smaller, recurring expenses like over-the-counter medications, first aid supplies, and routine medical products like sunscreen or eyeglasses. Additionally, out-of-network services such as therapy, chiropractic care, or acupuncture are often overlooked. Silver can assist in identifying these types of expenses by analyzing your past purchases and highlighting items that are FSA-eligible, helping you make a more informed decision when setting your contribution amount.

How does loss aversion affect my FSA contribution decision?

Loss aversion is a psychological factor where the pain of losing money is felt more intensely than the pleasure of saving or gaining it. This can make individuals overly cautious when setting their FSA contribution, potentially leading them to contribute less than they might actually need. By carefully reviewing past expenses and considering future needs, you can overcome loss aversion and set a contribution amount that adequately covers your healthcare expenses without the fear of losing unused funds.

Chapter 4: How to Avoid Losing Money on Your FSA

What is the "use-it-or-lose-it" rule, and how can it cause me to lose money?

The "use-it-or-lose-it" rule in FSAs means that any funds left unspent at the end of the plan year are forfeited. This can lead to losing money if you contribute more than you can reasonably spend on eligible expenses within the year. To avoid this, it's crucial to estimate your healthcare expenses accurately and monitor your FSA balance throughout the year.

How can I track my FSA balance to avoid losing funds?

You can track your FSA balance by regularly logging into your FSA account online or through your FSA provider's app. Many employers also offer tools that send alerts or notifications as your balance gets low or as the plan year-end approaches. This helps you stay aware of how much money is left and prompts you to spend it before it's too late.

Are there any strategies to avoid losing money if I have leftover FSA funds?

If you find yourself with leftover FSA funds near the end of the year, consider purchasing eligible items in advance, such as over-the-counter medications, medical supplies, or even eyeglasses. Additionally, some FSA plans allow a grace period or a rollover option, where a small amount of unspent funds (up to $640 for 2024) can be carried over to the next year. Check with your plan to see if these options are available.

What are common mistakes that lead to losing FSA funds?

Common mistakes include underestimating eligible expenses, forgetting to check your balance, and not taking advantage of eligible purchases toward the end of the year. Additionally, failing to submit claims within the allowed timeframe (including the runout period) can result in losing money. To avoid these mistakes, plan ahead, track your spending, and make use of tools like Silver to identify and submit eligible expenses efficiently.

How can Silver help prevent me from losing FSA funds?

Silver automates the process of tracking and spending your FSA funds by connecting to your accounts at major retailers and scanning your purchases for FSA-eligible items. It also helps with timely claim submissions, ensuring that you don’t miss deadlines. By keeping you informed and automating much of the process, Silver reduces the risk of losing money due to unspent or unclaimed FSA funds.

What should I do if I’m approaching the end of the year and still have a significant FSA balance?

If you’re nearing the end of the year with a significant FSA balance, review your upcoming healthcare needs and stock up on eligible items. You might also schedule medical appointments or procedures that you’ve been delaying. Additionally, check if your plan offers a grace period or a rollover option, allowing you more time or flexibility to use the remaining funds.

How does the FSA grace period work, and how can it help me avoid losing money?

The FSA grace period is an extension provided by some plans that gives you extra time—typically 2.5 months after the plan year ends—to incur and claim eligible expenses. This can help you avoid losing funds if you didn’t use up your FSA balance by the original year-end deadline. If your plan offers a grace period, it’s a valuable opportunity to ensure all your FSA funds are spent wisely. Be sure to check with your employer to see if this option is available in your plan.

Can I use my FSA funds to pay for future medical expenses?

FSA funds can only be used for expenses incurred during the plan year or during the grace period if your plan offers one. You cannot prepay for services or products that will be used in the future unless they are purchased before the plan year ends. This is why it’s important to plan your spending carefully throughout the year to avoid having leftover funds.

How can I avoid missing the deadline for submitting FSA claims?

To avoid missing the deadline for submitting FSA claims, mark important dates on your calendar, including the end of the plan year and the deadline for submitting claims (often called the "runout period"). Using an app like Silver can also help by automating the claim submission process, ensuring that all eligible expenses are submitted in a timely manner, reducing the risk of forfeiting any funds.