March 15 marks the annual grace period deadline for health care flexible spending accounts (FSAs)—the last day for participants in health FSA plans incorporating the optional two-and-a-half-month grace period to spend their remaining funds from last year (for plans ending Dec. 31).
In addition, if year-end health FSA plans have adopted a 90-day run-out period, all expense claims for the previous year must be filed by March. 31, regardless of whether the plan has also adopted a grace period, in order to draw on those funds prior to forfeiture.
What Participants Should Know
Since changes were introduced to FSAs by the Treasury Department in 2013, there are three options for FSA extensions that plan participants should be aware of:
- Grace period. An optional grace period gives employees an additional two-and-a-half months to incur new expenses using prior-year FSA funds. At the end of the grace period, all unspent funds must be forfeited.
- Carryover. If an FSA plan has the carryover feature, participants can roll over up to $500 of unused FSA dollars to the next year but will forfeit any excess over $500 at year-end.
Plans can offer either the carryover feature or a grace period, but not both. It’s one or the other (or neither).
- Run-out period. In addition, if a plan has a “run-out period,” employees typically have up to 90 days beyond the end of the plan year to request reimbusement for expenses incurred during the previous plan year. After this time, all remaining money is forfeited. For plan years that end Dec. 31, the run-out period for filing claims would end on March 31.
- For plans that offer a carryover option and a run-out period, run-out expenses will be deducted from the carryover amount (up to $500). Carryover funds remaining after run-out expenses are reimbursed will still be available to the account holder during the rest of the plan year. For example, if the account holder carries over $500 dollars and submits $200 in run-out expenses, he or she will have $300 remaining in carryover funds during the rest of the year.
- For plans that offer a grace period option and a run-out period, both periods overlap and expenses incurred during the grace period must be claimed before the run-out period ends.
Spending Tips for Leftover FSA Dollars
At the same time, employers should remind participants about the kinds of purchases that can be made with FSA dollars. For plans with a grace period, reminders should be sent prior to March 15. Communications to employees can include the following tips:
- Keep track of your FSA balance. Not sure how much you have left in your FSA? Contact your FSA administrator ahead of the deadline so you have time to spend down any remaining money.
- Explore your eligible expenses. You can find information about covered expenses in your plan document or by contacting your FSA administrator. There are specific products and services that are and aren't eligible for FSA spending, such as some mobile monitoring devices (which are eligible) and medical marijuana (which is not). You can view an online eligibility list of products and services that can be purchased using FSA dollars.
- Use your FSA to shop for products. Health care products like breast pumps, first-aid kits, hot and cold therapy packs, and contact lenses are among thousands of other items covered by an FSA.
- Use your FSA to pay for medical services. Use an FSA for co-pays and deductibles when visiting physicians, dentists, ophthalmologists, and for alternative medical services such as chiropractic care and acupuncture.
- Submit for reimbursement of qualified expenses before it's too late. Additionally, if your FSA plan year ended Dec. 31, your FSA may have a grace period that allows you to incur new expenses using last year’s funds through March 15.
Jeremy Miller is president and founder of FSAstore.com, an online shop for products eligible for reimbursement through a flexible spending account.
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