With most Americans on lockdown in their homes due to the coronavirus outbreak and elective medical procedures being put on hold, many of those who own a flexible spending account (FSA)—which must be used in the year in which it is taken—are wondering if they will lose out on their savings. With a contribution limit of $2,750, FSA holders are positioned to potentially lose thousands of dollars.
However, some FSA experts note that the Coronavirus Aid, Relief and Economic Security (CARES) Act expanded the number of medical devices and medicines FSA holders can use their accounts to buy. Furthermore, changes made by the federal government allow FSA holders to use their FSA dollars to take advantage of telehealth and telemedicine services.
“One benefit of both FSAs and HSAs [health savings accounts] is that telehealth and telemedicine can now be paid for with both,” says Shobin Uralil, co-founder and chief operating officer of Lively. “Some of the cancellations [of medical appointments] can be offset by this.”
The general trend among workers who are offered both an HSA and FSA is to go with the HSA, Uralil says. That is because money invested in an HSA stays with the owner for life, he notes. That said, FSAs can be used with any kind of health insurance, she notes, whereas HSAs can only be used with high-deductible health plans (HDHPs).
Since the outbreak of the coronavirus pandemic, close to 50% of what people normally spend on medicine and medical procedures through FSAs, HSAs and health reimbursement accounts (HRAs) has disappeared, says Brian Colburn, senior vice president of corporate development and strategy at Alegeus.
“We do expect a bounce back in elective procedures, but the billion-dollar question is, when will that happen? When are people going to feel comfortable going back to the doctor or hospital?” Colburn says. “There is going to be a long road to getting a vaccine.”
The advice that Alegeus is giving clients is to plan ahead, he says. It is common for FSA holders to schedule procedures at the end of the year, Colburn says. “We think that will be exacerbated this year, so people could face capacity issues. Get your procedures scheduled and on the books so that you are not blocked out.”
He also notes that the CARES Act has made 20,000 over-the-counter medicines available for FSA accounts. People should familiarize themselves with those, he says.
Rachel Rouleau, director of compliance at FSAstore, also points to the increasing list of over-the-counter medications that FSAs and HSAs can now be used to purchase. The CARES Act also added menstrual care products to the list, she notes. “There is more opportunity now than ever,” she says. “You would be surprised what you can purchase with an FSA. We sell everything from sunscreen to breast pumps to baby monitors to first aid kits to thermometers.”
Colburn points out that regulators have recently allowed companies to offer their employees the opportunity to adjust their election amounts midyear. “But we think most people are better off keeping the elections in place, given their tax benefits,” he suggests.
Also, the IRS has changed its rules so people who had up to $500 carried over from 2019 now have the full year to spend the money, Colburn says. The IRS has also increased the amount that people can roll over to 2021 to $550. Should the coronavirus lockdown continue, Colburn says it is possible that the IRS could increase that amount.
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