Flexible Spending Accounts: Year in review
It’s been an interesting year for Flexible Spending Accounts. Some FSA plans now have a rollover option of up to $500 in funds, or have a grace period to use remaining funds. Check in with your FSA administrator or HR department to see what deadline applies to your plan.
Now, let’s get to the year-in-review...
Health Care Reform
- As of January 1, 2013, FSA contributions were limited to $2,500 per FSA account. But, if you and your spouse each have your own FSA that means you can contribute up to $5,000 per household! The yearly contribution limit will be adjusted for inflation.
- According to a Mercer National Survey of Employer-Sponsored Health Plans, the average employee contribution to an FSA was $1,427 in 2012 – which shows that the contribution cap should not affect many participants.
- If you have a grace period for your FSA, unused funds for the grace period do not count towards the $2,500 limit for the new plan year.
Use it or Lose it Changes
The U.S. Treasury Department and IRS recently changed the FSA “Use it or Lose it” rule to allow up to $500 to rollover to the following year. Not all FSAs have this option.
The following scenarios could apply to your FSA, but as always, it’s advisable to contact your FSA administrator or HR department to find out which provisions apply.
- An FSA plan might have a $500 carryover option allowing you to use your FSA funds into 2014.
- An FSA plan could have a grace period, which is a 2 ½ month extension to use your remaining FSA funds until March 15, 2014 for FSA plan years ending December 31.
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