As the year-end approaches, employees may have unused funds in their flexible spending accounts (FSAs). These tax-advantaged accounts help employees pay for eligible health care expenses with pretax dollars, but unused funds are at risk of being forfeited.
Employees may associate FSA funds with only doctor visits and prescriptions, but many everyday health care products and services may also qualify.
Common FSA-eligible expenses include:
Less commonly recognized eligible expenses may include:
Some expenses require a prescription, a letter of medical necessity or other documentation. Products such as air purifiers, humidifiers and nutritional supplements may qualify only under specific medical circumstances. Employees should check their FSA administrator's eligibility list before making purchases.
Strategic plan design
While many health care FSAs follow a calendar-year schedule, employers can opt to allow a grace period or carryover amount
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Grace period |
Carryover |
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Employees are granted up to 2 ½ months after the plan year ends to incur eligible expenses. |
Employees can carry a limited amount of unused health care FSA funds into the next plan year, subject to IRS limits and plan provisions. |
Implementing the grace period or carryover amount provides employees with an extra opportunity to ensure funds are used. Consult with your employee benefits team for assistance determining which relief option could benefit your employees.