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Basics

What is an FSA "run-out" period?

During the early part of the Flexible Spending Account (FSA) plan year, you will hear plenty of terms being thrown around like "grace period" or "rollover," but one term that is constantly misunderstood is the FSA "run-out" period. This is a standard account feature that is built into the structure of most flexible spending accounts (FSAs), but it can often be confused with the FSA grace period because it is so similar. So what's the deal with the FSA "run-out" period? Let's find out.

"Run-Out" Periods

An FSA "run-out" period refers to the period of time in the new plan year during which account holders can file claims for expenses incurred during the previous plan year. This timeframe is chosen by the employer, not the IRS, and can last for any period of time, but the most common FSA "run-out" period is 90 days. For instance, if your FSA plan year ends on December 31 and you have a 90 day run out period, you would have until March 31 of the following year to submit claims for reimbursement.

What is the difference between the FSA grace and "run-out" periods?

A common source of confusion for FSA users is the difference between the FSA grace period and "run-out" period. Unlike the "run-out" period, the grace period is an option chosen by the employer, which gives FSA users 2.5 months after the end of the plan year to spend their remaining FSA funds.

The key difference is that with a grace period, new products/services can be purchased with prior funds into the new plan year, but with the run-out period, only expenses that were incurred during the prior plan year are eligible in the near year. FSAs can offer both the grace period and run-out, neither, one or the other, or even another option in which remaining funds up to $500 rollover to the following year, but this is left up to the FSA plan sponsor to choose. Always check with your FSA plan sponsor to find out which rules apply to your plan!

Looking ahead to March deadlines

With all of that confusion out of the way, March is poised to be a pivotal month for FSA users. If you have the FSA grace period and your FSA plan year ended December 31, 2016, you have until March 15, 2017 to make purchases with 2016 funds, while those with the 90 day "run-out" period have until March 31, 2017 to file claims for expenses incurred during 2016.

So don't wait - learn about the most important deadlines on your account and spend down your FSA funds at FSAstore.com! We have the web's largest selection of FSA eligible products to support the continued good health and wellness of you and your dependents.

Basics

Does my FSA have a grace period or $500 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 $500 rollover and the 2.5 month grace period.

What are the $500 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 $500 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.

$500 Rollover

This FSA regulation gives account holders the ability to "roll over" up to $500 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 $500 to be rolled over, but the same rollover limit must apply to all participants under the current FSA plan rules. The $500 rollover does not count toward the following year's maximum election amount ($2,600 for 2017), so account holders could feasibly roll over $500 of last year's funds on top of the full election amount of $2,600 for 2017, which would give them $3,100 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 $500 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 FSAstore.com! 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!