Navigating FSA Deadline Extensions: Essential Facts and Tips for Consumers

Understanding FSA Deadline Extensions: 6 Key Facts

Managing a Flexible Spending Account (FSA) can be daunting, especially when it comes to deadlines. With approximately 70% of FSA account holders facing some form of deadline extension, understanding the nuances of these timelines is crucial. Here are six essential facts to help you manage your FSA funds effectively and avoid forfeiting your hard-earned money.

1. FSA Funds Have Expiry Dates

Unlike Health Savings Accounts (HSAs), which allow funds to roll over indefinitely, FSAs typically have an annual deadline by which funds must be spent. Most plan holders must use their available balances by December 31 each year, although exceptions do exist, such as Limited Purpose FSAs designated for dental and vision expenses.

2. Grace Periods and Runout Periods Explained

Employers may offer either a grace period or a runout period. A grace period allows an additional 2.5 months post the plan year end for spending remaining funds, meaning the March 15 deadline is crucial for many. On the other hand, a runout period, which usually lasts 90 days, permits submitting claims for expenses already incurred during the prior year.

3. Partial Rollovers Offer Flexibility

If your employer provides a carryover option, any leftover funds can be rolled over to the next year—up to $660, as per current IRS limits. Make sure to check your company's plan specifics with your HR department to know your options.

4. Employers Control Extensions

It's important to emphasize that employers have discretion over FSA extensions; they can choose to offer either grace periods, carryovers, or neither. This means it's vital to be aware of your specific employer's policies regarding FSAs.

5. Documentation for Certain Expenses

Not all eligible FSA products or services are straightforward—purchases like medical equipment may require additional documentation, such as a Letter of Medical Necessity (LMN) from your healthcare provider. Always verify if the items you wish to purchase are covered by consulting the FSA Eligibility List available at FSA Store®.

6. Gifting Health with FSA Funds

FSA funds can be utilized for purchases benefiting qualified dependents, including children up to age 26. Whether you’re considering buying health aids or wellness devices, being smart about your spending helps maximize your benefits. However, be cautious against stockpiling; the IRS disallows purchasing more products than can be consumed within the plan year.

Conclusion

With an average of $463 in FSA funds being forfeited annually due to misunderstandings about these deadlines, it's critical to remain vigilant about managing your account. By checking your FSA balance, understanding your deadlines, and utilizing resources available at FSA Store®, you can navigate your account more effectively. Not only will you prevent losses, but you will also unlock the potential tax savings associated with using an FSA wisely.

For more insights and management tools, visit FSAstore.com. This year, make the most of your Flexible Spending Account and safeguard your funds against expiration.