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Remind FSA holders to use their remaining balances before the plan year (or grace period) ends
Employees in the U.S. with health care or dependent care flexible spending accounts (FSAs) should be reminded to spend the remaining balances in their accounts before the end of their plan year, when any leftover money must be forfeited—even though these accounts are employee-funded via salary deferral. Employers may (but are not required to) provide account holders with a grace period, which typically gives them until March 15 of the new year to spend their FSA funds.
Different Accounts, Different Rules
The "use it or lose it" rule does not apply to employee-owned and portable health savings accounts (HSAs), in which funds carry over and can build up from year to year whether contributed by the employee, the employer or both.
Most employer-funded health reimbursement arrangements (HRAs) allow what are actually notational "funds" to remain and build as well although, unlike HSAs, the funds attributed to an HRA are forfeited when employment terminates.
For those with money remaining in their FSA accounts, here are eight tips provided by FSA administrator
Wageworks Inc. to avoid forfeiting funds at the end of the year or grace period:
www.SaveSmartSpendHealthy.com provides additional lists of eligible expenses, savings calculators, videos and other resources for account holders.
FSA Funding Limit Takes Effect in 2013
A provision of the health care reform law will, starting in January 2013, cap employee salary reduction contributions to health FSAs at $2,500 per year. Afterward, annual increases in the limit will be indexed to the U.S. Consumer Price Index. Prior to 2013, limits on funds contributed to FSAs were at the employer's discretion.
"Account holders would be wise to check their FSA balances now and put a pro-active wellness plan in place before they potentially forfeit their hard earned wages," advises Natasha Rankin, executive director of the Employers Council on Flexible Compensation (ECFC). She suggests encouraging FSA account holders to:
Stephen Miller, CEBS, is an online editor/manager for SHRM.
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