During the holidays, when stress can run high and finances low, it’s more important than ever that employees understand how to use their flexible spending account (FSA). However, lack of awareness and understanding of what’s eligible can cause employees to leave FSA funds on the table at the end of the year. According to an Employee Benefit Research Institute report published in May 2024, roughly half of all FSA accounts forfeited funds in 2022 with an average forfeiture of $441. HR teams and employers can help ensure this doesn’t happen to their employees, by taking time to educate employees about how their tax-free funds can be used.
FSAs allow employees to use pre-tax dollars to pay for eligible out-of-pocket healthcare expenses such as copays, prescription and over-the-counter medications, vision care, dental work, and other everyday health needs for themselves, their spouse, and eligible dependents. However, as December 31 approaches, your employees are likely faced with the challenge of spending remaining funds before your plan year expires. While the benefits plan year can vary widely by organization, proprietary data based on shoppers to FSA Store indicates that nearly 70% of FSA users have a December 31 spending deadline. That means it’s time to help employees understand how to use—not lose—their remaining FSA funds.
Beat the FSA Use-It-or-Lose-It Spending Deadline
Nobody wants to walk away from hard-earned money, yet nobody wants to spend New Year’s Eve ordering medical supplies just to spend down their FSA account. With so many beneficial eligible products and services to support employee health and well-being, it’s better that employees shop now to spend down their account and bolster their physical and mental health in the process.
HR teams can support this goal by communicating about FSA deadlines and sharing information about FSA-eligible products and services. For starters, consider these five interesting categories to help guide employee end-of-year FSA shopping.
- The familiar and necessary. Practical products like pain relievers, cold, flu, and allergy medications, bandages, first-aid essentials, sunscreen, cough drops, thermometers, ointments, menstrual care supplies, hot and cold packs—are all eligible with FSA funds and are things employees likely use every day. For added convenience, employees can purchase time-saving bundles that feature a curated collection of products that meet a specific health need, such as pain-relief bundle, skincare bundle, children’s health bundle, and more.
- Stress and pain relief. Employees can relieve the stress of the holidays and focus on improving mental health in the new year with heated neck and shoulder wraps, foot and back massage tools, or a warm Epsom salt bath. For all-day comfort, consider custom orthotics, muscle and joint patches or ointments, compression socks and gloves, or back, wrist, and knee braces. And for comfort at night, check out the selection of pillows, sleep aids, heating pads, calming masks, and CPAP supplies.
- Health and well-being tools and technology. There are so many amazing products to help employees stay mindful of their mental and physical health: Health trackers, light therapy, sleep and blood pressure monitors, TENS units, a full body analysis scale that measures weight, muscle and bone mass, water and fat content, and more. This type of health technology can help employees proactively manage their health, which also benefits your organization.
- Support for seasonal conditions. Along with the bright lights and festive meals, the holiday season can sometimes bring unexpected challenges, such as weight gain, fatigue, anxiety, and seasonal blues. There are FSA-eligible weight management programs that provides personalized support and medication to achieve and sustain a healthy weight, which is important to broader health goals. Meanwhile, if employees are feeling out of sorts, they can use FSA funds to access online therapy in as little as 48 hours. FSA funds can also be used to purchase light therapy products to address seasonal affective conditions.
- Uncover the unexpected. There are many FSA-eligible products that will likely surprise you and your employees. Make employees aware of eligible expenses like designer eyewear; light therapy to relieve teeth and gum soreness; acne care medicines and devices; wearable health and activity trackers; baby health monitors with zoom features and live audio; full-body heat wraps; OTC hearing aids; wristbands that relieve menopause symptoms; fertility trackers; and genetic testing kits. These surprisingly eligible items can improve health and quality of life, while helping spend remaining FSA funds.
With so many eligible FSA products and services, there is something for everyone—there is no reason for employees to miss out on all the advantages offered by their spending accounts. Communicating about FSA spending is an easy way for HR teams to bring value and comfort to employees and their families while keeping the season merry and bright.
Susan Elliott-Bocassi is senior vice president of operations for Health-E Commerce, parent brand to FSA Store, HSA Store, and Caring Mill.