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End of year FSA rush: Help employees deplete their funds before it’s too late



‘Tis the season for end-of-year madness. From wrapping up open enrollment to budgeting for the new year, there are a lot of boxes to check off. But there’s one you won’t want to miss: Reminding employees about depleting their Flexible Spending Account (FSA) funds before year-end.

In the midst of the chaos, it can be easy to forget about annual employee reminders. But with FSAs, funds are typically use-it-or-lose-it, so it’s a good idea to give employees that extra push.

FSAs: The basics

FSAs are a popular option for employees to save money on medical expenses.  

Funds can be used on services like: 

  • Prescriptions
  • Vaccinations
  • Over-the-counter medications, and
  • Deductibles and co-payments.

With an FSA, employees can make pre-tax contributions from their paycheck to a yearly fund. FSAs can also boost tax savings since funds are contributed on a pre-tax basis. The IRS also sets contribution limits every year based on factors like inflation.

However, those funds do not roll over year-to-year, meaning that any money left in the account at the end of the year will be lost. 

In fact, the Employee Benefit Research Institute estimated that in 2020, 48% of workers forfeited money, with an average loss of $408. And estimates that workers have forfeited an aggregate amount of $3 billion in 2019 and $4.2 billion in 2020.

But with the right education and support from HR, employees don’t have to miss out on their funds. 

Help employees before it’s too late

Even if employees have FSAs, that’s not a guarantee they know how to get the most out of them. And that’s a problem, because the average amount of money placed into FSAs has increased every year since 2015, the Fintech Times reported. That means each year, employees may be losing more and more money if they don’t deplete their funds.

That’s where HR pros can step in with education and information about using FSA funds before it’s too late. Here are some tips on how to do it from Lisa Myers, director of client services, benefits accounts, WTW. 

  • Encourage employees to check and understand their FSA balance. “Your spending accounts administration provider, for example, might send out statements and/or provide a ‘use-it-or-lose-it’ notification,” says Myers. “In many cases, employees can sign up for periodic text notifications of their account balance.”
  • Remind employees about your plan’s “run-out” period, which gives them extra time in the new year to get reimbursed for 2023, and remind them of any other guidelines, such as carryover of unused funds or grace periods to use 2023 funds into the beginning of the new year.
  • Inform employees of what funds can be used on. “Let employees know that FSA funds can be used for eligible expenses for their spouse and children even if they aren’t covered under the employee’s medical plan,” says Myers. Additionally, you can provide them with a list of surprising or little-known eligible expenses, such as eye care, first aid kits, baby monitors and antacids.
  • Help employees take the guesswork out of it. “Let them know to look at labels when they shop,” says Myers. “Some larger-chain drug stores, for example, put an ‘FSA Eligible’ label right on the on the product’s price tag. Provide a link to online marketplaces such as The FSA Store that only sells products that can be purchased with health FSA and HSA funds.” 

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