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.

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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.

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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 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 V. Stinson
Ex-staff writer, Kiplinger's Personal Finance

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.