Smart Year-End Move: Manage Your Employee Benefits
For 2021, employers may provide a 12-month grace period for both types of flexible spending accounts.
Whether you have a use-it-or-lose-it flexible spending account or a more forgiving health savings account, you can make the most of your health savings by taking certain steps at the end of the year.
Get the Most From Your Flexible Spending Accounts
If you are worried about losing funds you’ve set aside in a pretax flexible spending account for health or dependent care—perhaps because you put off medical appointments or your kids have been home during the pandemic—relax. Legislation enacted in response to COVID-19 tweaked rules for flexible spending accounts. Instead of losing those funds at the end of the year, employers can modify their plans to allow workers to carry over unused funds through 2022.
Normally, your employer may let you roll over up to $550 of unused funds in a health care FSA for an additional 2½ months (that is, until March 15 of the following year), and you can’t roll over any dependent care FSA funds. But for 2021, employers may provide a 12-month grace period (to December 31, 2022) for both types of flex accounts. That’s particularly significant for dependent care spending accounts, because Congress allowed those FSA holders to sock away up to $10,500 of pretax wages in 2021, up from the standard limit of $5,000.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
If your employer doesn’t provide a grace period, keep in mind that depleting unused funds in a health care spending account is easier than using up a dependent care FSA. You can pay for home COVID-19 testing kits, hand sanitizer and masks. You can also use FSA funds to buy over-the-counter drugs, such as pain relievers, cough suppressants and antihistamines. For a full list of eligible items, go to www.fsastore.com/fsa-eligibility-list.aspx. If you’re unsure about whether your employer offers a grace period, contact your human resources department as soon as possible.
Budget For a Health Savings Account
If you have a Health Savings Account (HSA), no need to make a midnight run to Walgreens, because there’s no deadline to use funds in the account. But this is a good time to figure out how much you can afford to sock away next year. For 2022, the HSA annual contribution limit for self-only coverage increases from $3,600 to $3,650. If you have family coverage, the limit rises from $7,200 to $7,300. If you’re 55 or older by the end of 2022, you can put in an extra $1,000 in “catch up” contributions.
To qualify for an HSA, your 2022 health insurance policy must have a minimum deductible of $1,400 for self-only coverage or $2,800 for family coverage. Didn’t max out your 2021 HSA contributions? You have until April 15, 2022, to add to the account.
As is the case with a health care FSA, you can use HSA funds for personal protection equipment, such as masks, and COVID testing kits, as well as other out-of-pocket medical expenses. You can’t have both a health care FSA and an HSA.
Rivan joined Kiplinger on Leap Day 2016 as a reporter for Kiplinger's Personal Finance magazine. A Michigan native, she graduated from the University of Michigan in 2014 and from there freelanced as a local copy editor and proofreader, and served as a research assistant to a local Detroit journalist. Her work has been featured in the Ann Arbor Observer and Sage Business Researcher. She is currently assistant editor, personal finance at The Washington Post.
-
What Not to Do if an Employee or Loved One Is Kidnapped
Businesses need to have a crisis plan in place so that everyone knows what to do and how to do it. Sometimes, calling the authorities isn’t recommended.
By H. Dennis Beaver, Esq. Published
-
Why You Shouldn’t Let High Interest Rates Seduce You
While increased interest rates are improving the returns on high-yield savings accounts, that may not be an effective place to park your money for the long term.
By Kelly LaVigne, J.D. Published
-
403(b) Contribution Limits for 2024
retirement plans Teachers and nonprofit workers can contribute more to a 403(b) retirement plan in 2024 than they could in 2023.
By Jackie Stewart Published
-
Roth IRA Contribution Limits for 2024
Roth IRAs Roth IRA contribution limits have gone up for 2024. Here's what you need to know.
By Jackie Stewart Published
-
7 Things Medicare Doesn’t Cover
Healthy Living on a Budget Medicare Part A and Part B leave some pretty significant gaps in your health-care coverage. But Medicare Advantage has problems, too.
By Donna LeValley Last updated
-
Four Tips for Renting Out Your Home on Airbnb
real estate Here's what you should know before listing your home on Airbnb.
By Miriam Cross Published
-
Five Ways to a Cheap Last-Minute Vacation
Travel Procrastinator? No matter. You can pull off a fun and memorable getaway on a moment's notice — without breaking the bank.
By Vaishali Varu Last updated
-
How Much Life Insurance Do You Need?
insurance Instead of relying on rules of thumb, you’re better off taking a systematic approach to figuring your life-insurance needs.
By Kimberly Lankford Published
-
When Is Amazon Prime Day?
Amazon Prime In 2023 Amazon had two Prime Day events — one in July and another, called Big Deal Days, in October. We expect 2024 to follow the same schedule.
By Bob Niedt Last updated
-
How to Shop for Life Insurance in 3 Easy Steps
insurance Shopping for life insurance? You may be able to estimate how much you need online, but that's just the start of your search.
By Kaitlin Pitsker Published