Take Advantage of the Flex Account "Sweet Spot"

Ask Kim

Take Advantage of the Flex Account "Sweet Spot"

From now until March 15, you may be able to combine your 2011 and 2012 FSA contributions -- making this the perfect time for large, uninsured expenses.

My employer gives me until March 15 to finish using up the money in my previous year’s flexible spending account. Can I use the money I’m contributing to my account for 2012 as well as the money left from 2011?

SEE ALSO: Make the Most of Your Flex Account in 2012

Yes. If your employer gave you an extension until March 15, 2012, to use your 2011 FSA money (some employers set a December 31 deadline), you still have time to use the 2011 money. Plus, you can use the entire amount you signed up to contribute to your FSA for 2012, even though you’ve been making contributions only for a few weeks so far this year.

That means if you have $2,000 left in your health care FSA from 2011, and you plan to contribute $3,000 to your account for 2012, you can use the full $5,000 tax-free until March 15. After that date, you’ll lose any money remaining in your account from 2011, but you can still use the $3,000 at any time before the deadline for spending the 2012 money. You can use FSA money on deductibles, co-payments and other out-of-pocket medical expenses, such as prescription drugs, eyeglasses, contact lenses and dental procedures. See IRS Publication 502 Medical and Dental Expenses for a list of eligible expenses.


Because you’ll have an extra-large FSA balance until March 15, now is the time to schedule any expensive uninsured medical procedures you’ve been considering, such as laser eye surgery or a major dental procedure such as orthodontia.

Keep in mind that this is the last year you’ll have as big a pot of money during the FSA “sweet spot”: Employers currently set the maximum amount you can contribute to a health care FSA, and they usually set it at $3,000 to $5,000 for the year. But starting in 2013, a federal law is scheduled to cap the maximum at $2,500.

Got a question? Ask Kim at askkim@kiplinger.com.