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FSA Rollover

Health Products for You talks about FSA rollover and identifies what and when you can rollover your Flexible Spending Account contributions.

Do FSA rollover?” is another frequently asked question we hear. Contributions to your Flexible Spending Account are done via a pretax, payroll deduction to help offset the costs of some FSA eligible items. The maximum contribution amounts and deadlines are set by the Internal Revenue Service (IRS). Normally, your Flexible Spending Account or FSA pretax contributions are forfeited at the end of your plan year, typically December 31. Due to the current pandemic, it has become more difficult to properly use these accounts. This has led the IRS to change some rules which cover deadlines and FSA rollovers that may benefit you. Here we shed some light on these changes and help you maximize your FSA account.

FSA Rollover Traditionally…

In a normal world, the IRS sets maximum contributions, FSA rollover amounts, and deadlines for those with FSA accounts. But of course, the last 18 months or so have not been “normal.” The Covid-19 pandemic has turned the world upside down and our healthcare too. Typical FSA contributions/deadlines include:

  • $2750 maximum contribution ($2850 in 2022)
  • $550 rollover limit ($570 in 2022)
  • December 31 claim deadline

IRS Clarifies COVID-19 Relief for Flexible Spending Accounts

Due to the current pandemic, the IRS has provided FSA Covid relief by loosening some of these guidelines for employers. While these changes have been set by the IRS, it is your employer who must decide to offer them to their employees. These changes were enacted due to the Consolidated Appropriations Act (CAA 2021) passed by Congress. These changes include:

  1. Expanded FSA Rollover: New legislation gives your employer the option to waive your FSA deadline for 2021. This means you may have the FSA rollover option to roll over all unused FSA contributions into the next plan year.
  2. Increased Grace Periods: Normally when your plan year ends on December 31 a grace period of up to March 15 may exist. Thanks to CAA 2021, your employer can extend this grace period for another 12 months. At the end of the 2022 plan year, this will revert back to 2 ½ months.
  3. Mid-Year Expansion: The IRS has allowed employers to open up mid-year FSA changes. This gives participants the opportunity to enroll or dis-enroll as well as add or withdraws funds from their FSA account.

Here’s a breakdown for the 2022 HSA and FSA contribution year compared to 2021 from the National Law Review website natlawreview.com:

Health Plan Limits

2021

2022

Health FSA Contribution Limit

$2,750

$2,850

Health FSA Carryover Limit

$550*

$570

HSA Contribution Limit (Individual)

$3,600

$3,650

HSA Contribution Limit (Family)

$7,200

$7,300

HSA Catch-Up Contribution Limit (age 55-plus)

$1,000

$1,000

HDHP Minimum Deductible (Individual)

$1,400

$1,400

HDHP Minimum Deductible (Family)

$2,800

$2,800

HDHP Maximum Out-of-Pocket Amount (Individual)

$7,000

$7,050

HDHP Maximum Out-of-Pocket Amount (Family)

$14,000

$14,100

 

*Special FSA COVID-19 relief gives employers the option to allow employees to carry over their unspent 2021 FSA balance into 2022.

Employers that offer FSA plans to their employees were granted further flexibility under the Taxpayers Certainty and Disaster Tax Relief Act of 2020. Under this act, FSA plans have additional discretion in 2021 and 2022 to adjust their plans due to unanticipated consequences of this seemingly un-ending pandemic. The IRS issued Notice 2021-15 which allowed flexibility for employers such as:

  • FSA rollover flexibility for carryover of unused amounts from 2020-2021 plan years
  • Extension of claims periods for plan years ending 2020-2021
  • Special rule regarding post-termination reimbursement from healthcare FSAs
  • Allowing certain mid-year election changes for health FSAs

These are all great changes by the IRS to allow employers the flexibility to manage their FSA plans, but employers are not required to enact any of these IRS changes.

You should talk to your employer or HR department on FSA rollover AND the changes they have adopted that can maximize your FSA contributions.

Meanwhile, check out HPFY’s wide range of FSA eligible items and buy from our FSA store

 

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