8 Easy Reporting Mistakes about Flexible Spending Accounts (FSAs) and the 12/31 Deadline

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FSAstore.com details biggest points of consumer confusion in advance of the 12/31 FSA Spending Deadline

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“This year, we want to help our media partners bring clarity to the biggest questions account holders have so they can benefit better from their tax-free FSA funds."

The December 31 use-it-or-lose-it deadline is approaching and millions of flexible spending account (FSA) holders are at risk of forfeiting their hard-earned money. FSAstore.com, the first direct-to-consumer e-commerce destination dedicated to making FSAs simple through a 100% eligible product list and educational resources “you can actually understand”, wants to help the 30+ million FSA account holders get the right information to succeed and avoid forfeiture this deadline season.

After more than a decade in business, many of the same questions that customers had when the company started are still confusing FSA users in 2019. “FSAstore.com has always put consumer education front and center through our content and resources,” said Jeremy Miller, CEO and founder of FSAstore.com. “This year, we want to help our media partners bring clarity to the biggest questions account holders have so they can benefit better from their tax-free FSA funds. And that’s why we put together this list.”

1. General health items aren’t eligible

  • Every product available for FSA spending must adhere to IRS 213(d) guidelines, which state that, to be a qualified medical expense, products and services must “diagnose, cure, mitigate, treat, or prevent a disease.” But there’s a classification of items that fall under “general health” which are confusing consumers. A toothbrush is a great example of a general health item that is not covered under an FSA -- it will help to support your basic health and hygiene, but does not qualify for FSA spending as it does not meet IRS 213(d) specifications.

2. Pre-payment of medical/dental/vision services is typically not allowed

  • FSAs can only cover services that were incurred during your plan year. If you want to set aside money for a future procedure for next year, it is not allowed. You can only use FSA funds to cover purchases that have already been made. There may be some exceptions to this requirement, such as with orthodontia where prepayment may be allowed, but in most cases, an expense must be incurred during the current plan year to be eligible.

3. Gifting and gift cards aren’t eligible

  • Sure, a gift card could be used to cover the cost of an eligible product or service. But gift cards are not FSA-eligible, since you must incur the expense at the time of service, not another time. The IRS has clear rules on who and who cannot be covered under your plan, and this can only include the account holder, his/her spouse and qualified dependents.

4. Stockpiling is not allowed

  • As great of an idea as it may sound, stockpiling (generally thought of as purchasing too much of the same product or service than you can use within the plan year) is not compliant with FSA regulations. For example, purchasing 600 of the same sunscreen. The IRS has clear rules on only allowing reimbursement for expenses you will use within the plan year. Our recommendation is to leave words like "stock up" out of your FSA deadline stories to ensure account holders don't have their purchases declined.

5. Just because an FSA card gets accepted does not mean it is an eligible expense.

  • Many medical services accept FSA cards, but this does not mean the incurred expenses are eligible (i.e you use your card at a pharmacy for an ineligible item such as cosmetics). Many times you will be required to prove that your expense is eligible with appropriate documentation. If your administrator determines you used your card for an ineligible expense, you may be required to pay it back or offset the amount with an eligible claim.

6. Dual-purpose items are not always eligible

  • This is another confusing point for many FSA users: dual-purpose items. In some cases, a product or service is considered dual-purpose, meaning it may or may not qualify as medical care. This pertains to items or services that promote overall health and well-being and can also be used to treat a specific medical condition. Examples include most vitamins, most supplements, makeup (even if it contains SPF 15+ sun protection), and massage or similar therapy. In some cases these can be covered with documentation proving they are required for medical care, but are often not eligible.

7. Rx items are actually over-the-counter medicines that require a prescription

  • In 2010 with the passage of the Affordable Care Act, over-the-counter medicines were required to be accompanied with a prescription for FSA reimbursement. This regulation applies to any product with an active medical ingredient like Advil or Zyrtec. FSAstore.com created a Prescription Process to make it easier to purchase these items with tax-free funds.

8. A Letter of Medical Necessity (LMN) is not a guarantee

  • In some cases, dual-purpose or ineligible items or services can be covered with additional documentation from a medical professional. This letter must outline how a product or service can help assist in the treatment of a specific medical condition and must be submitted to a benefits administrator for approval. Ultimately, this decision is left up to the administrator to determine if it follows the guidelines of the IRS rules and may not be approved in some cases.

But there are developments to look out for:

1. FSAs may become more flexible

  • FSAs have seen an active year in the U.S. Congress and there is currently a bill in the House of Representatives called the Restoring Access to Medication Act of 2019 (HR 1922), which would remove the prescription requirement on OTC medicines and allow feminine care products to be eligible for FSA spending. We encourage FSA users to contact their congresspersons to show their support for this bill!

2. FSAs provide great value for consumers

  • FSAs are more accessible than ever and can provide real savings for account holders. With the introduction of FSA debit cards, this benefit can be used everywhere from retailers like FSAstore.com to the doctor’s office. In fact, a single individual making the median U.S. income ($63,030) who elected the full 2019 FSA contribution ($2,700) would realize nearly $880 in taxes saved over the course of the year.

An FSA is a wise addition to any financial portfolio and a smart benefit to elect annually. Yet, only 1 in 5 Americans who have access to an FSA will sign up for one. Consumer confusion around account rules and deadlines contributes to nearly $400 million being forfeited annually, according to FSAstore.com internal research.

FSAstore.com is your 12/31 deadline destination
The 12/31 FSA deadline is just around the corner, and FSAstore.com is the only place to shop with zero guesswork with your remaining 2019 FSA funds. FSAstore.com has account holders covered this deadline season with:

  • The largest selection of 100% guaranteed FSA-eligible products
  • The ability to use FSA debit card and skip the paper claims
  • 24/7 access to trusted FSA experts via phone or online chat
  • Fast and free shipping on orders over $50
  • Accepts all deadline orders until midnight on December 31

About FSAstore.com
FSAstore.com is flex spending with zero guesswork. It’s both the largest online marketplace for guaranteed FSA-eligible products and an educational resource that you can actually understand. It’s the company's mission to help millions of FSA holders manage and use their accounts, and save on more than 4,000 health items using tax-free funds.

About Health-E Commerce
Health-E Commerce is the parent company of FSAstore.com, HSAstore.com and WellDeserved, a family of brands that serve the 60+ million consumers with pre-tax health and wellness accounts. The company has also created Caring Mill, a popular private-label line of health products that benefits Children’s Health Fund and enables customers to make a donation with each purchase. Since 2010, the company’s brands have led the direct-to-consumer e-commerce market for pre-tax health and wellness benefits. Health-E Commerce plays an essential role in expanding product eligibility for important new categories within the IRS-approved list of eligible medical expenses like sunscreen and breast pumps. The company leads a committee of industry experts to promote the important national conversation around product safety and authenticity.

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Sean Hanft
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