How to Spend FSA Before Your Grace Period Expires
If your workplace offers a flexible spending (FSA) account with a 2-1 / 2 month grace period for spending 2020, make sure you spend it before March 14, when the grace period expires . You have until Monday to spend on qualified healthcare services; after that all unused money disappears forever.
Last-minute spend on a use-or-lose basis
With the FSA, an employer sets aside pretax dollars on your earnings to help pay for health or dependent care costs such as glasses, over-the-counter drugs, or trips to the dentist. Roughly speaking, this is a 30% discount off what you usually pay.
If you are unsure if your plan includes a grace period, check with your employer. If not, you’ll also want to ask if the FSA has an rollover option that allows you to carry over $ 550 of funds to the next year (you can have either a grace period or an rollover, but not both).
If you have a grace period but are not sure what to buy with expiring funds, check out the list of options at the bottom of this Lifehacker post (you can always download an aspirin in case of doubt).
Other FSA exemptions
The December 2020 pandemic legislation also expanded some of the rules for the FSA, although this is not mandatory for your employer. Even so, you can find out if these rules apply to your plan. According to legal news site JD Supra , these changes include:
- Extended rollover and grace periods for 2021 and 2022. Any balance under $ 5,000 (for families) at the end of 2020 can be carried over to 2021, and any balance at the end of 2021 can be carried over to 2022. grace periods have been extended from the original 2.5 months to the end of the full calendar year (i.e. you have the entire year of 2021 to use your funds for 2020).
- FSA account selections are no longer irrevocable during the 2021 target year. Employers can also allow employees to make anticipated changes to their mid-year FSA elections without a change in status or qualifying event during 2021.
- Employers can allow laid-off employees to continue accessing their accounts until the end of the planning year in which their membership ends, plus any grace period.
At the very least, the new law relaxes the IRS restrictions, but you will want to check with your employer if and when these changes will go into effect for your own FSA plan.