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New Limits on Flex Accounts Coming

Starting in 2013, the amount employees will be allowed to contribute to medical flexible spending accounts will be less.

I read that the contribution limit for flexible spending accounts is going to be reduced to $2,500 in 2013. My employer has been giving us until March 15 of the following year to use up our FSA money. Will that grace period still apply, or will I have to use up all of the 2012 money by December 31?

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You’re right that annual contributions to medical FSAs will be limited to $2,500 starting in 2013 (down from $3,000 or $4,000 with some employers), but people whose employers give them until March 15 of the following year to use up the money in their accounts will still have the extra time to spend it. Most employers offer this grace period, so you won’t need to scramble to use up the money allocated in 2012 before the end of the calendar year.

That means January 1 to March 15 will continue to be a sweet spot for FSAs. Not only will you be able to use up any money remaining in your account from 2012, but you’ll also be able to use the full amount you plan to contribute to your FSA in 2013 (up to $2,500) anytime after January 1, even if you haven’t actually contributed the money from your paychecks yet. Keep this FSA sweet spot in mind if you’re planning a medical procedure and you’ll still have money left over in your account -- especially since early 2013 is the last chance you’ll have to benefit from the larger contribution limits from 2012.

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For more information about upcoming changes from the health care reform law, see Your Health Care: What’s Next. And for more information about how you can use your FSA money, see our 7 Smart Uses for Your Flex-Account Money slide show.

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