Flexible Spending Account (FSA)
Candlefocus EditorTypically, money in an FSA must be used by the end of the plan year but employers can offer a grace period of up to two-and-a-half months, usually ending on March 15 of the following year. This allows employees to use money from the previous year if needed.
Due to the pandemic, the IRS issued guidance allowing employers to amend their medical FSA plans for the 2021 plan year. Employers may either allow an increased carryover amount or extend the grace period to make sure employees have more access to their funds.
An FSA is a great option for those who may need more funds for medical-related costs, from doctor’s visits to prescriptions and even alternative treatments like massage therapy or chiropractic care. It is important to note that the IRS imposes a “use or lose it” rule on FSAs, so it is important to use contributions during the plan year or risk having to forfeit any remaining funds at the end of the plan year.
Overall, an FSA is a great way to save pre-tax money for medical costs that can help offset regular out of-pocket expenses. It is important to research an employer's FSA plan before signing up and consider any restrictions that may be in place. It is also important to stay up-to-date on the IRS guidelines to maximize the benefits of an FSA.