Does my FSA have a grace period or $550 rollover?

As an FSA user, you know just how important end of year spending is to maximizing the potential of your account. However, while the "use-it-or-lose-it" rule is still in effect and many account holders must spend their funds by the end of each plan year, there are 2 vital deadline extensions that all FSA users should be mindful of: the $550 rollover and the 2.5 month grace period.

Update for 2021: The FSA rollover has increased to $550

What are the $550 rollover and 2.5 month grace period?

Historically, FSA users would forfeit any unused FSA funds at the end of each plan year thanks to the "use-it-or-lose-it" rule. While this rule is still in place, two important changes have emerged over the past decade to provide a measure of relief to FSA users: the $550 rollover and 2.5 month grace period. FSA plan sponsors can choose to offer ONE of the two rules when administering FSAs, but not both.

$550 Rollover

This FSA regulation gives account holders the ability to "roll over" up to $550 in to the next plan year's account to prevent a large portion of funds from being forfeited. The FSA plan sponsor can elect to allow less than $550 to be rolled over, but the same rollover limit must apply to all participants under the current FSA plan rules. The $550 rollover does not count toward the following year's maximum election amount ($2,750 for 2021), so account holders could feasibly roll over $550 of last year's funds on top of the full election amount of $2,750 for 2021 which would give them $3,250 available for reimbursement for healthcare expenses that year.

2.5 Month Grace Period

The other option is the 2.5 month grace period. This gives account holders the ability to spend down the remainder of the previous year's FSA funds before March 15 (for FSA plans ending December 31), after which any unspent funds would be forfeited back to one's employer. Unlike the FSA run-out, which can be offered in conjunction with a rollover or grace period and provides up to 3 months after plan year end to spend down remaining funds for expenses incurred during the prior plan year only, the grace period allows users to spend down remaining FSA dollars on new expenses incurred within the new plan year as well.

How do I know if I have the rollover or grace period?

Your end of year options can determine how you will spend your allocation over the course of the year, so it's vital that you know your FSA plan details before setting an election amount for the coming year. Aspiring FSA users should inquire about these regulations during their health benefits Open Enrollment to plan out the optimal healthcare spending for the coming year.

Last but not least, if you're an FSA user and you've never heard of the $550 rollover or grace period, speak with your benefits administrator immediately! FSA plan administrators, whose information can typically be found on the back of an FSA benefits card or by contacting your HR department, can let you know the exact details of your FSA. With March 15 just around the corner, FSA users all over the country could still have money left to spend, so don't let a cent of your money go to waste!

For everything else regarding your FSA, you can rely on! Shop the web's largest selection of FSA eligible products, browse product/service regulations in our Eligibility List and plan your yearly spending with our handy FSA Calculator!

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