Flexible Spending Account Expiration: A Comprehensive Guide

Flexible spending accounts (FSAs) are a great way to save on taxes, but it's essential to understand how they work and when they expire. Typically, FSAs expire at the end of the plan year or the last day of the plan year, whichever comes first.

FSAs can be offered through an employer or purchased individually, and they often have a deadline to use up the funds. For example, if you have a calendar-year FSA, you'll need to use up your funds by December 31st of that year.

As a general rule, FSAs are "use it or lose it", meaning you'll forfeit any remaining balance if you don't use it by the deadline. This can be a significant loss, especially if you've set aside a substantial amount.

FSAs have specific rules to help you make the most of your contribution fund. You can carry over up to $610 of unused funds from the previous year to the new year's plan.

An FSA carryover is an optional provision that allows you to add unused funds from the previous year to the new year's plan. This can be a huge help if you didn't use up all your funds before the year ended.

A grace period extends the current calendar year of funds up to 2 1/2 months. For example, an FSA plan that expires on December 31, 2023, could offer a grace period option, allowing participants to use the funds until March 14, 2024.

Employers can't offer both FSA rollover and grace period plans. They may choose to offer neither option, so be sure to check your plan details.

FSAs have specific rules, but understanding them can help you save money and make the most of your contribution fund.

Enrollment periods for Flexible Spending Accounts (FSAs) are crucial to keep in mind. Employees can enroll in or change their FSA election(s) within 31 days of their date of hire or a qualifying status change.

Additionally, employees can also enroll or make changes during open enrollment. It's essential to mark these dates on your calendar.

If you're an employer looking to renew your company's FSA plan, you'll need to do so near the plan year end. Typically, this is handled by a member of the HR department. Don't worry if you miss the renewal period, though - the effective date of the FSA usually cannot be changed retroactively.

To make things easier, here are the key FSA enrollment and renewal dates:

After renewing the plan, eligible employees will receive email reminders to renew or cancel their current plan. They'll have a specific timeframe to complete their enrollment preferences.

Enrollment periods are a crucial aspect of FSA enrollment and renewal. You can enroll in or change your FSA election(s) during the designated periods.

Within 31 days of your date of hire or a qualifying status change, you can make changes to your FSA election(s). This is a great opportunity to adjust your elections if your personal or work situation has changed.

Open enrollment is another period when you can enroll in or change your FSA election(s). This is usually an annual event that takes place at the same time each year.

Here are the specific enrollment periods:

Renewing your company's FSA plan is a straightforward process that requires some planning ahead. The primary administrator or benefits administrator renews the FSA plan near the plan year end, typically a member of the HR department.

The renewal process usually starts on a specific date, for example, Nov. 28 for a plan year ending Dec. 31. The administrator can log onto the platform to renew the plan on this date.

The software platform will send email reminders to prompt the administrator to renew the plan, for instance, on Nov. 28, Dec. 5, and Dec. 10. These reminders help ensure the process is completed on time.

You must complete company FSA renewals by Dec. 15. This deadline is crucial to avoid any issues with the plan's effective date.

Here's a summary of the key dates for FSA renewal:

After completing the renewal process, eligible employees will receive an email reminding them to renew or cancel their current plan. They will have until Dec. 25 to complete or confirm their enrollment preferences.

A Health Care FSA allows you to cover eligible health care expenses, including those for you and your IRS eligible dependents.

You can carry over up to $500 in a Health Care FSA, depending on your employer's plan, or your employer may offer a 2.5 month grace period to use the FSA in the next calendar year.

A Limited Purpose FSA is a type of Health Care FSA that's limited to dental and vision expenses, which also allows for a carryover of up to $500 or a 2.5 month grace period.

In contrast, a Dependent Care FSA doesn't allow for carryover, and you'll lose any remaining dollars if you don't submit receipts by your employer's deadline.

Here's a quick comparison of the three types of FSAs:

To be eligible for a Dependent Care FSA, you or both you and your partner must be working, looking for work, or going to school.

If your company offers an FSA again the following year, you can carry over up to $610 of unused funds from your current FSA. This is called a rollover, and it's limited to health care FSAs.

The employer can designate any amount up to $610 to roll over, but it's a one-time option - you can't roll over funds from one year to the next indefinitely. It's also worth noting that this rollover amount may change in the future, so be sure to check with your employer for the most up-to-date information.

A grace period, on the other hand, allows you to use any funds left in your FSA for 2 1/2 months after it ends. This means you have a bit more time to use up your funds before they're lost.

An FSA carryover, or rollover, allows employees to add up to $610 of unused funds from the previous year to the new year's plan.

Employers can't implement both FSA rollover and grace period plans, making it an either-or proposition.

An FSA grace period extends the current calendar year of funds up to 2 1/2 months, allowing participants to use the funds until a certain date, such as March 14, 2024.

Rollovers are limited to health care FSAs, and employers can designate any amount up to $610 to roll over.

The type of FSA plan determines what happens to unused funds when the plan ends.

Employees with a plan that offers a rollover can carry over up to $610 of unused funds to the new year's plan.

A grace period allows employees to use any funds left in their FSA for 2 1/2 months after it ends.

Employees with a plan that ends with a use-it-or-lose-it policy will lose any funds left in their FSA after their current plan ends.

A 90-day run-out period is standard after an FSA ends, allowing employees to submit claims for any expenses incurred during their FSA plan period.

The rollover amount is limited to $610 for health care FSAs, and employers can designate any amount up to $610 to be rolled over.

Curious to learn more? Check out: What Is a Current Accounts

If you join a new company, your LPFSA contribution limit doesn't reset to zero. You can contribute up to the annual limit through your new employer.

You can contribute to an LPFSA through one employer, leave for another employer, and still contribute up to the annual limit with the new employer. This is true regardless of how much you contributed through the previous employer.

For example, if you contributed $3,050 to an LPFSA with your previous employer and switch jobs in the same year, you can also contribute up to $3,050 with the new employer.

Dependent care FSAs have some unique rules when it comes to rollovers. Unlike regular FSAs, dependent care FSAs do not allow rollovers, which means any remaining funds at the end of the plan year will be lost.

Employers can offer a grace period of up to 2 1/2 months for dependent care FSAs, allowing employees to use the funds for eligible expenses for about 75 days after the plan year runs out.