How Do You Know What the Hell Is Going on With Your FSA This Year (and Next)?
A recent study found that 50% of people with flexible expense accounts (FSA) do not have a clear understanding of the details of what is “use or lose” in these tax savings, especially the timing of when the funds in them should be spent. … More than ever this year, it’s not entirely surprising: new, overlapping extensions have been added to the COVID relief law that have made FSA spending even more flexible – and certainly more confusing. Here’s what you need to know about spending for 2021 and planning for next year.
FSA is slightly less “use it or lose it” for 2021.
FSA – Tax – Free Health Care Accounts provided by your employer – usually only offer one of the following two options for any unused funds you have left at the end of a given year:
- You can carry over to next year up to $ 550.
- You can take advantage of a 2.5 month grace period to spend your remaining funds.
However, the 2020 COVID Relief Act created an additional opportunity that allowed employees to carry over all of their unused money from 2020 to 2021 for both healthcare and dependents. This means that in 2022 you may have to spend all of your remaining FSA funds from both 2020 and 2021, or you risk losing them entirely, so you will definitely need to calculate your carry-over balance before you decide how much withdraw from your paycheck next year.
Compounding the confusion is the American Rescue Plan Act 2021, which also allowed employers to increase the FSA’s annual dependency care contribution limit to $ 10,500 for 2021 alone.
How to find out the deadline for spending your FSA funds
A recent Health-E Commerce study shows that 76% of respondents were not notified of when they were spent by the FSA, or at least do not remember being notified.
For this reason, you will want to contact your employer’s HR department directly and confirm the details of your plan, its spending limits and balance sheet, and any other questions you may have. You cannot count on anything that you just read above; your specific plan may not include new rollover options as they are not mandatory for employers. By checking now, you will give yourself more time to spend your balance before the end of the year, after which they may disappear forever.
How can I spend FSA funds quickly?
If you can’t figure out what to buy before you run out of FSA funds, consider the suggestions in this Lifehacker post . At the very least, you can stock up on simple items like aspirin, sunscreen, or first aid kits. The FSA store and the Amazon FSA store are good places to start shopping.