Every year at this time, workplace emails, the media, advertising at retailers, and even family and friends remind you to hurry up and spend your health care flexible spending account (FSA) dollars before you lose them.
These are important reminders because no one likes to get caught on the wrong side of the "use it or lose it" rule, which requires consumers who don't spend their entire FSA contribution for the year by the deadline to forfeit the remaining balance to their employer.
This provision, which I've discussed in a few other blog posts, was originally designed to make sure that FSAs wouldn't be improperly used as tax shelters. However, it has created some unintended consequences by encouraging individuals to engage in wasteful health care spending, such as buying extra OTC medicines and supplies or getting a second pair of prescription sunglasses, typically at the end of their plan year or grace period.
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