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AILSA CHANG, HOST:

During the depths of the pandemic, the IRS allowed Americans to roll over the balances in their health flexible spending accounts. A health FSA lets employees spend pretax money on health-related expenses. But this year, it's basically back to use it or lose it again. And Kenny Malone from our Planet Money podcast has this cautionary tale.

KENNY MALONE, BYLINE: Regina Acheampong got the fateful email a few weeks ago from her company's HR department.

REGINA ACHEAMPONG: Hey; don't forget you have, you know, money in your FSA. And if you don't use it, you lose it. And then it was like the light bulb went off for me.

MALONE: A light bulb that said, uh-oh, how much did I put in my FSA?

ACHEAMPONG: I logged in, and it showed my balance of, like - it was a little over $2,000. And I was just like, uh-oh.

MALONE: Two thousand dollars?

ACHEAMPONG: Yeah.

MALONE: Oh, no.

ACHEAMPONG: Yeah. So...

MALONE: So in Regina's case, she had to spend or lose $2,000 on health stuff in, like, a month.

ACHEAMPONG: So I literally solicited some guidance on Twitter - what am I going to do with this?

MALONE: With this $2,000 - and one of the first Twitter responses? Regina's brother, actually.

ACHEAMPONG: My brother was like, hey; I need another massage gun because I don't know what happened to mine.

MALONE: Why not? In the shopping cart.

ACHEAMPONG: Then my mom said she wanted to try using a body pillow 'cause I use them. I got her one, and then I got...

MALONE: And while Regina spends, a quick FSA origin story.

STEVEN BANK: Well, this is about democratizing tax avoidance.

MALONE: Steven Bank is a professor at UCLA School of Law and says, in the '50s and '60s, corporate executives would avoid high taxes by saying like, hey; instead of paying me more income, which can be taxed, can I have some perks?

BANK: Company cars.

MALONE: Stock options.

BANK: Retirement funds.

MALONE: Health expenses.

BANK: It was part of compensation that could be paid for outside of the income tax system.

MALONE: A tax code overhaul in 1978 addressed those perks by allowing all of us to also have some of those perks, and the health FSA evolved from there. It's a useful thing if you have predictable health costs or, God forbid, wind up in the hospital. But it could also leave you, like Regina Acheampong, binge-spending at the end of the year.

ACHEAMPONG: And then so I love Black Girl Sunscreen. It's really great. But - and so I got...

MALONE: Ten of them? It says 10 of them.

ACHEAMPONG: It's 10.

MALONE: So six jars of multivitamins, two bottles of contact solution, two massage guns, two body pillows later...

ACHEAMPONG: The total was $1,062.29.

MALONE: Now, of course, that does still leave roughly a thousand dollars, right?

ACHEAMPONG: It does. It does.

MALONE: Regina says she will find a use for that thousand dollars and that she made a different FSA decision in this year's open enrollment.

ACHEAMPONG: No. No, thank you. I think you just got to have a strategy going in, and I absolutely did not. And so that's my fault there.

MALONE: FSA havers, the time is now. Use-it-or-lose-it-ers (ph), you have been warned.

Kenny Malone, NPR News.

(SOUNDBITE OF LEIKELI47 SONG, "MONEY") Transcript provided by NPR, Copyright NPR.

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