Flexible Spending Accounts (FSA)

March 15: Last chance to use 2018 FSA funds?

If your company provides flexible spending accounts (FSAs) for health care expenses, a key deadline is looming: March 15. That’s the last day FSA participants can use funds allocated for 2018 if the employer allows a grace period for payouts. Or other options may apply to your FSA.

Using your FSA

With a health care FSA, you set aside pre-tax funds through regular payroll deductions. The annual limit for 2018 was $2,650 ($2,700 for 2019). These funds may be used to pay for qualified health care expenses, including health insurance deductibles, copayments and most medical and dental costs.

At the end of the plan year, any remaining amount in the account is generally forfeited under the use-it-or-lose it rule. However, an employer may offer certain options to offset this rule:

  1. Grace period: With this option, you’re granted an extra 2½ months to empty out your account. That means you have until March 15 to pay qualified expenses with 2018 funds before the remainder is forfeited. Check with your HR department to see if a grace period exists.
  2. Carryover rule: Alternatively, an employer may allow FSA participants to carry over up to $500 of unused funds to the next year. Note that the company can provide the grace period or carryover rule — but not both. Again, check with HR about availability.
  3. Run-out period. Participants generally have up to 90 days after the end of the plan year to request reimbursements for expenses incurred during the previous plan year. For 2018, the run-out period typically ends on March 31, 2019. Any excess is forfeited. The run-out period may be used in conjunction with a grace period or the carryover rule.

To maximize FSA benefits, make a thorough analysis of the amount needed for each year and be diligent about using funds to pay for qualified expenses. The March 15 deadline may be your deadline to use your FSA funds.

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