Is FSA flexible due to COVID?

Asked by: Madonna Shanahan  |  Last update: October 2, 2023
Score: 4.4/5 (13 votes)

Employers may allow participants to carry over unused amounts. WASHINGTON — The Internal Revenue Service today provided greater flexibility, due to the pandemic, to employee benefit plans offering health flexible spending arrangements (FSAs) or dependent care assistance programs.

Is the FSA extended due to COVID?

Dependent Care FSA Extended Grace Period

The Dependent Care FSA grace period has been extended from March 15 to December 31 for the 2020 and 2021 plan years.

What is the FSA carryover from 2023 to 2024?

If a cafeteria plan permits health FSA carryovers, the maximum amount that a participant can carry over from the 2023 to the 2024 plan year is $610 – a $40 increase.

Will I lose my FSA?

FSA Grace Period or Carryover

Usually, money that goes unused in an FSA account is forfeited at the end of the calendar year (except for the COVID-19 changes for 2021 and 2022).

Is there a grace period for FSA?

You usually have to spend FSA money by the end of the year or by March 15 of the following year if you have a grace period. You might have until Dec. 31, 2022, to spend FSA money earmarked for 2021, but this is an exception.

What is an FSA (Flexible Spending Account?)

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Is there a grace period for FSA 2023?

Grace period

You have until March 15, 2023 to use the remaining funds in your FSA and until March 31, 2023 to file a claim. *You can use your Bank of America Health Account Visa® debit card to pay for expenses during the grace period.

Has the FSA deadline been extended?

They have different rules and deadlines, though, and a big one is coming up: April 15, 2023, is the deadline to file 2022 Health and DepCare FSA claims. As you may have read elsewhere, the IRS has extended the tax filing deadline to Oct. 16, 2023, for California taxpayers in disaster areas.

What happens to the money in my FSA if I don't use it?

So, what happens when you don't spend all your FSA money? Good Question. "Typically the money goes back to the employer," says Jake Spiegel is Research Associate, Health and Wealth with the Employee Benefit Research Institute (EBRI).

Who gets leftover FSA money?

If the employee fails to incur enough qualified expenses to drain his or her FSA each year, any leftover balance generally reverts back to the employer.

How do I get my unused FSA money back?

Unused FSA money returns to your employer. The funds can be used towards offsetting administrative costs incurred during the plan year, employers can also reduce annual premiums in the next FSA year, or funds must be equally distributed to employees who enroll in an FSA for the next year.

What are the new FSA rules for 2023?

The IRS has increased the Flexible Spending Account (FSA) contribution limits for the Health Care Flexible Spending Account (HCFSA) and the Limited Expense Health Care FSA (LEX HCFSA). For 2023, participants may contribute up to an annual maximum of $3,050 for a HCFSA or LEX HCFSA.

What happens to unused FSA funds 2023?

The other option is to allow participants to roll over up to $610 of unused funds at the end of the plan year (in 2023) and still contribute up to the maximum in the next plan year.

How much FSA money can roll over?

As a result, employers have one of two options for unused FSA funds. The first is to offer employees a grace period of up to 2.5 months to spend the remaining funds. The other option is to allow participants to roll over a maximum of $610 of unused funds at the end of the year (as of 2023).

How does the Cares Act affect FSA?

Yes. With the new law, you are now able to purchase, or be reimbursed for, over-the-counter medications (examples: Tylenol, Motrin, cough suppressants; items that used to require a prescription) using your Healthcare FSA without a prescription.

Can you use 2023 FSA for 2022 expenses?

Your 2023 FSAs can only be used to reimburse eligible expenses for care provided from the effective date of your enrollment through March 15, 2024. Different rules apply to Health Care and Dependent Care eligible expenses if your participa- tion in the plan ends before December 31, 2024.

What happens if I overspend my FSA card?

If the FSA is overspent, the annual election amount may be adjusted, and the per-pay-period deduction amount is increased to make up for the missed contributions. Either way, you would be able to submit manual claims for reimbursement for eligible expenses incurred while the garnishment was in place.

What is the FSA last month rule?

Last-month rule.

Under the last-month rule, if you are an eligible individual on the first day of the last month of your tax year (December 1 for most taxpayers), you are considered an eligible individual for the entire year.

Can FSA be stopped in mid year?

A Health FSA plan might allow for a mid-year change due to judgments, decrees, or orders resulting from a divorce, annulment, legal separation or a change in legal custody. It would have to affect health or accident insurance coverage for a (foster) child who is a dependent.

How much can I roll over to FSA in 2023?

In 2023, you can carry over up to $610. This means that if you have money left in your FSA at the end of the plan year in 2023, for any reason, you can keep up to $610 of it. The rest goes back to your employer. This is an increase from $550 in 2022.

How do I spend my FSA money 2023?

How to use FSA money. Common purchases include everyday health care products like bandages, thermometers and glasses. Everything from medical expenses that aren't covered by a health plan (like deductibles and co-pays to dependent day care) to over-the-counter medication can also be eligible.

How much FSA can I roll over to 2024?

Carryover will allow you to roll over up to $610 of your remaining Health Care FSA balance from plan year 2023 into a plan year 2024 Health Care FSA, after all eligible claims have been submitted by the March 31, 2024 run-out deadline.

Does FSA cover dental?

According to the Internal Revenue Service Publication 752, an individual can use their FSA coverage for all dental procedures that treat or prevents a dental disease such as: Teeth cleaning. Root canals. Dental fillings.

Can you use FSA for dental?

You can use funds in your FSA to pay for certain medical and dental expenses for you, your spouse if you're married, and your dependents. You can spend FSA funds to pay deductibles and copayments, but not for insurance premiums.

Can I pay last year's medical bills with this year's FSA?

No, expenses must be incurred during the current plan year.