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Help employees keep control over their flexible spending account dollars
It’s Dec. 1, and Renée is starting to panic: “I don’t want to lose any of my FSA money. When is the deadline? What expenses are covered? How much money do I have left to spend? I have to find a way to spend this money … fast! Where do I go to find my balance information?”
Renée’s concerns aren’t unique. She is among the 35 million account holders who made tax-advantaged allocations to their flexible spending accounts (FSAs) for 2014. She’s also among the 51 percent who wait until December to spend their FSA dollars.
Dec. 31 is a big day for FSA account holders. For many, this may be the last day they are allowed to spend their FSA funds on eligible expenses—or risk forfeiting their account balance to their employer. This is commonly known as the use-it-or-lose-it rule.
Although employers have offered FSAs as part of their benefit plans since the 1970s, in 2013, the U.S. Treasury Department and the Internal Revenue Service made FSAs a bit more flexible. Under the new regulations, employers could consider a menu of FSA plan options to extend that year-end deadline, giving employees more time and flexibility. These options include:
1. A carryover or rollover option. If an FSA plan has been amended to include this option, employees can carry over up to $500 of unused FSA savings to the next year. Employers determine the carryover amount.
2. A grace period. If a plan includes a grace period option, employees have an additional two-and-a-half months beyond Dec. 31 (until March 15) to spend unused FSA dollars. Plans may not offer both the $500 carryover and the grace period; it’s one or the other, or neither.
3. A run-out period. If a plan includes a run-out period, employees have additional time beyond the year-end deadline to submit reimbursement requests for eligible expenses—but only if those expenses were incurred during the plan year. The run-out period is usually 90 days, which would make March 31, 2015, the last day to submit receipts and reimbursement requests.
Employers are not required to offer any of these options, but if a plan includes an extended deadline, employees have more time and flexibility in how to use their accounts to help meet changing health needs.
According to Alegeus Technologies, a benefits administration firm, in 2015 there will likely be higher FSA enrollment due to the carryover change.
Alegeus enrollment data showed 8 percent of employer groups adopted the carryover for 2014 FSA plans, but that number is anticipated to increase as the carryover feature eases employees’ concerns about losing their FSA money.
Once employees know the deadlines for spending their FSA funds, they can focus on using their accounts to purchase eligible expenses that make sense for them and their families.
Let’s go back to Renée. Frequent and consistent communications from her employer are key to ensuring that she and employees like her make the most of their FSA and don’t risk losing their money. But benefits communications shouldn’t overwhelm, so keep the message simple and straightforward.
For instance, sharing these three spending tips can help FSA participants have a frenzy-free December and stay in control of their FSA dollars:
• Know what is FSA-eligible. Check your plan guidelines regarding
which products and services are FSA-eligible, allowing them to be purchased with pretax FSA account dollars. Thereare thousands of products you can buy with an FSA, and you can also use an FSA to cover co-pays, deductibles and co-insurance for different medical services.
• Keep track of your FSA account balance. If your employer offers an account tracker or calculator, take advantage of it so all of your available FSA dollars are used before deadlines.
• Use your FSA debit card, online or in person,if your employer offers one. FSA money will automatically be deducted when using your card, so there’s no waiting for reimbursement for out-of-pocket expenses you incur.
Jeremy Miller is president and founder of
FSAstore.com, an online shop for products eligible for reimbursement through a flexible spending account (FSA).
For 2015, FSA Contribution Limit Rises to $2,550,
SHRM Online Benefits, October 2014
FSA Open Enrollment Reminders,
SHRM Online Benefits, August 2014
IRS Issues Guidance on Health FSA Carryovers and HSAs, SHRM Online Benefits, April 2014
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