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You Don’t Have to Forfeit Funds in Your 2020 FSA Account

  • Employee Benefits
  • Article
  • 6 min. Read
  • Last Updated: 01/28/2021

women deciding how to spend fsa funds

Table of Contents

If you have a flexible spending account (FSA), the one aspect that always lacked flexibility has been the use-it-or-lose-it rule. This created a constant year-end challenge for what to do with unspent FSA dollars, and it’s estimated that each year as much as $500 million is forfeited.

And then 2020 happened, with the COVID-19 pandemic disrupting opportunities for FSA users to schedule doctor appointments, elective surgeries, orthodontia services and much more. So, FSA dollars went unspent and in amounts more so than in the past. surveys revealed that more than 50 percent of FSA users indicated they have more money at the deadline than in 2019.

However, despite the disruptions of 2020, FSA forfeiture rates are the lowest in years, according to Shawna Kaplan Hausman, chief marketing officer of Health-E Commerce. Here are three factors that have had an impact:

Engagement with health and benefits

Many people found themselves with more time on their hands in 2020, as working remotely eliminated or at least cut down on commutes while business closures — restaurants, gyms and theaters — meant more people stayed home.

The strain the COVID-19 pandemic has created on American families is immense, as people juggle telework, remote learning for their children, separation from loved ones and parents and even financial hardship. People need help and began looking more closely at their employee health benefits. A September 2020 survey conducted by Voya Financial found that more than 70 percent of employees planned to spend more time reviewing voluntary benefit options offered by employers such as Employee Assistance Programs and financial wellness programs.   

With working professionals getting more in-tune with their benefits decisions, the days of letting hard-earned dollars disappear from an FSA might be over.

More Products and Medicines are Now Eligible as FSA Expenditures

In 2020, the scope of essential health products that could be purchased with FSA funds expanded, making more over-the-counter (OTC) medicines and feminine care products eligible. This change gave consumers the freedom to spend their account dollars on products such as sunscreen, baby care items, pain relief medicine and more. Consider this: the average household spends about $442 annually on feminine care products and OTC medication, according to the Consumer Healthcare Products Association.

FSA users can now factor the costs of these products in to their 2021 FSA contributions, while others have a much larger assortment of products on which to spend their remaining 2020 dollars after the IRS offered the opportunity for plans to extend the deadline to use those funds. However, deadlines vary so check with your FSA provider to determine the date by when you must use your 2020 FSA funds.

Flexibility for 2020 FSA

In mid-2020, as the COVID-19 pandemic continued to have a profound impact on people’s lives, the Internal Revenue Service made the unprecedented decision to give employers the option temporarily to allow mid-year FSA election changes for employees. These changes usually are allowed only with a qualifying life event such as marriage, the birth of a child or a job change.

The pandemic changed that. Employers were given the ability in 2020 to allow employees to  make new contribution elections relating to employer-sponsored health coverage to an FSA, while current FSA users could withdraw from contributing or  increase or decrease contributions to their accounts. For FSA users who overestimated or underestimated their 2020 contributions, this change provided an opportunity to reset their spending plans to avoid potential forfeiture of funds.

What’s Next?

If you have unused funds in your FSA account for 2020, plan to spend them wisely so you can avoid forfeiting your hard-earned FSA dollars. Stay ahead of your deadline with winter health
essentials from our partner, FSA Store.

If you are considering opening an FSA or another healthcare savings account, Paychex provides resources and educational information that can help better inform your decision.




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* This content is for educational purposes only, is not intended to provide specific legal advice, and should not be used as a substitute for the legal advice of a qualified attorney or other professional. The information may not reflect the most current legal developments, may be changed without notice and is not guaranteed to be complete, correct, or up-to-date.

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