Flexible spending accounts have become even more flexible this year, which is good news for people who need to find ways to use up their account money before they lose it all at the end of the year.
People can now use the tax-free money in the accounts to pay for the health portion of 23andMe tests. The Internal Revenue Service determined 23andMe tests were eligible for purchase by flexible spending account money earlier this year. Certain food allergy sensors, high-tech baby monitors and devices to improve posture were also recently added to the list of items account-holders can buy.
The new choices join a growing pile of health-related products that people can already buy with flexible spending account (FSA) money.
First aid kits, thermometers and machines to clean sleep apnea-treating CPAP devices are popular purchases, said Sylvia Zori, chief operating officer of FSAstore, an online marketplace where buyers can buy items eligible for purchase with FSA money. December 31 is the site’s busiest day, she added.
People who work for employers offering the flexible spending accounts (FSAs) can contribute up to $2,750 annually, according to IRS rules. The money goes into the account pre-tax and can be put towards expenses that aren’t covered by the employee’s health insurance plan.
The major catch, however, is that people forfeit any unused money at the end of the plan year. That can be the end of the calendar year, but not necessarily.
Employers can let account holders rollover a maximum of $500 to the next year or allow a grace period that gives workers another two and a half months to spend the money, the IRS notes. But employers don’t have to include either benefit, the agency said.
FSAs are different from health savings accounts, which let account holders use pre-tax money to pay for deductibles, copayments, coinsurance and other expenses. In addition to health-related products, FSA money can go towards deductibles and copayments, but not insurance premiums.
Americans had 28.8 million FSA accounts last year and there will be an estimated 30.2 million accounts this year, said Inci Kaya, lead analyst, health insurance and payments, at Aite Group, a Boston-based advisory research and consulting firm for financial service and insurance companies. Americans will use a projected $33.6 billion from their accounts this year, up from $31.7 billion last year, Kaya said.
FSAstore has previously estimated Americans give up more than $400 million in tax free money when their plan year runs out.
23andMe lets consumers see their genetic lineage and certain health predispositions, all with a saliva sample. The company offers the service for $199 (though a half-off deal runs through Dec. 2).
Earlier this year, the IRS determined consumers could put their FSA dollars towards the health portion of the 23andMe’s services. That could be up to $117.74, the company has previously said. The IRS made its determination after the 23andMe asked for guidance on whether consumers could use FSA money.
The 23andMe report can show the chances of having Type 2 Diabetes, late-onset Alzheimer’s disease, celiac disease and other conditions. “23andMe’s Health + Ancestry Service, the only direct-to-consumer genetic test that includes FDA-authorized health reports, provides information that can be used to better manage your health, lifestyle and identify potential genetic risks for certain health conditions,” said Jacquie Haggarty, 23andMe’s vice president, deputy general counsel.
Other direct-to-consumer genetic tests can be purchased with FSA money. For example, NVTA, -1.85% Invitae has accepted FSA money since June and its tests cost between $250 and $350. Tests can screen for certain genes linked to cancer, heart disease and other conditions, according to the company’s website.
“Medical genetic testing is affordable and easy to order, “ an Invitae spokeswoman said. “It’s a great way to use remaining FSA/HSA funds available at the end of the year to invest in your health. With Invitae, the cost is $250-$350 to get the same high-quality testing genetics experts use, including guidance from a clinician and access to genetic counseling to discuss results.”
Some experts have previously cautioned that people shouldn’t put all their faith in direct-to-consumer tests, because genetic counseling is a much more comprehensive look at genetic predispositions and risks.
In addition to genetic testing, there are other new ways to use to use FSA money this year, including:
Peanut and gluten sensors, which are available on FSAstore.com for $289 apiece. People using the sensors can put a piece of food in the device to see if there are traces of peanuts or gluten. So far, the sensors have “done quite well” in terms of sales, said Zori, though she declined to give specifics.
“More and more, as we talk to people at work here and so forth, we realize food allergies are a very big topic and health concern,” she said.
(Some observers say the jury’s still out on how effective the sensors are, though sensor makers say the product is effective.)
A posture pump that sells on FSAstore.com for $200, meant to relieve neck pain. The user lays down and the device wraps around their neck. The pump can increase or decrease the elevation to maximize comfort. The posture pump is one of the site’s top 20 best-selling items, Zori said.
Another item is the Miku Smart Baby monitor, which sells for $400. The monitor is one of the new breeds of high-tech baby monitors able to track a tot’s every twist and stir. The device can track sleep patterns and the temperature in your baby’s room, and it has the capacity to share and download video and picture.
Just as 23andMe asked the IRS to issue guidance on FSA eligibility for its health-related genetic test, Zori said FSAstore asked the IRS to advise on the eligibility of these three products. “There’s only so many Band-Aids you want to buy with your funds after a while,” she joked.