savings

New Rules for (Some) Flexible Spending Accounts

About half of employers in one survey said they plan to offer an FSA with a $500 carryover in 2014.

I heard that employers can now let people roll over $500 in their medical flexible spending accounts to the next year, rather than lose it all at the end of the year. Do all plans let you do this?

No. FSA plans aren’t all required to let you roll over the $500, but many are changing their rules to permit the transfer starting this year.

The “use-it-or-lose-it” rule of flexible spending accounts was one of the biggest downsides to saving in these plans – if you didn’t use all of the money you set aside for eligible medical expenses by the end of the year, you’d lose it. Some plans added a grace period to let you use the money by March 15 of the following year, but anything remaining in the plan at that time would disappear.

But the U.S. Treasury Department changed the rules in 2013, permitting employers to amend their plans and allow employees to roll over up to $500 in the account from one year to the next. Employers aren’t required to make the change, and only 28% of the employers surveyed by Visa and WageWorks (which administers FSAs for employers) changed their rules to permit the rollover in 2013. Many employers opted instead to keep the March 15 grace period for the year, because a company can’t offer both the rollover and the grace period at the same time. But more employers plan to make the change this year – the Visa/WageWorks survey found that 53% of employers plan to offer an FSA with a carryover in 2014.

This is a good time of year to ask your employer about its rules for rollovers; if your employer hasn’t made the change, you still have plenty of time to use the money in the account. You can use FSA money tax-free for your deductible, co-payments, and medical and prescription drug expenses that aren’t covered by insurance--a good thing to keep in mind as you take your child to doctor and dentist appointments before school starts.

And you can use FSA money tax-free for a number of other summertime expenses, including prescription sunglasses, certain kinds of sunscreen, eligible anti-itch cream (for poison ivy and insect bites), first aid kits, and allergy and sinus medicine. You can also use the money for eyeglasses, contact lenses and lens solution, as well as frequently overlooked expenses such as prenatal vitamins, breast pumps, hot and cold packs, knee and ankle braces, thermometers, blood pressure monitors, vaporizers, heating pads and bandages, says Jeremy Miller, founder and CEO of FSA Store, which sells FSA-eligible items.

Most Popular

Refunds for $10,200 Unemployment Tax Break to Begin This Month
Coronavirus and Your Money

Refunds for $10,200 Unemployment Tax Break to Begin This Month

The IRS will start issuing automatic refunds sometime in May to people eligible for the unemployment benefit tax exemption.
May 1, 2021
The Benefits of Working Longer
Empty Nesters

The Benefits of Working Longer

Delaying retirement for a couple of years—or even a few months—is the most effective way to improve your retirement security.
April 29, 2021
10 Dividend Growth Stocks You Can Count On
dividend stocks

10 Dividend Growth Stocks You Can Count On

What should investors prioritize in dividend growth stocks? A history of aggressive payout expansion, and the ability to generate enough cash to keep …
May 3, 2021

Recommended

Estate-Planning Your Stuff with T. Eric Reich
Empty Nesters

Estate-Planning Your Stuff with T. Eric Reich

What to do with the house, the vacation house and the china? We talk with a financial adviser who's got some wise counsel. Also, who makes up the so-c…
May 2, 2021
Stimulus Plan Has Health Insurance Benefits, Too
Coronavirus and Your Money

Stimulus Plan Has Health Insurance Benefits, Too

The plan’s health care provisions could deliver big savings for early retirees and laid-off workers.
April 29, 2021
Surprise Medical Bills Are Coming to an End
health insurance

Surprise Medical Bills Are Coming to an End

With the No Surprises Act taking effect in 2022, patients will no longer live in fear of receiving an unexpected and exorbitant medical bill for emerg…
April 27, 2021
11 Places That Will Pay You to Live There
real estate

11 Places That Will Pay You to Live There

Working remotely? You may want to check out these places that'll pay you to move there.
April 23, 2021