2016 Flexible Spending Account Deadline
CONSUMERS who have a flexible health care spending account at work need to double-check their employer’s rules to see if they have an important deadline coming up.
At many employers, March 15 is the end of a flexible spending account “grace period,” by which employees must spend money set aside last year. Any balances left over after the deadline are forfeited (unless the employer allows rollovers).
Flexible spending accounts allow employees to save money by setting aside a portion of their paycheck before deductions for taxes to help pay for things their insurance doesn’t cover, like deductibles, co-payments and medical supplies.
Rules for the accounts — known officially as “flexible health spending arrangements” — have evolved, and have led to some confusion in recent years because they may differ from one employer to another.
Previously, the accounts were governed by the “use it or lose it” rule: If funds in an account weren’t depleted by the end of the year, the employee forfeited any remaining balance. Fear over losing the money they set aside, however, generally led workers to be conservative in their contributions, and some avoided the accounts altogether.
To help address that problem, many employers adopted a two-and-a-half-month grace period. Since many plans run on a calendar year ending Dec. 31, that gives employees until March 15 to spend the funds set aside the previous year.
Then, in late 2013, the federal government changed the rules again, giving employers the option of allowing workers to carry over as much as $500 in a flexible spending account into a new benefit year. Employers must choose between the carry-over option and a grace period; they cannot offer both.
The Society for Human Resource Management says about 69 percent of employers offer the accounts and about a third of them offer the carry-over option. “It makes the accounts a little bit easier to live with,” said Bruce Elliott, manager of compensation and benefits for the society. “You don’t have to rush to the store to spend it.”
But about another third of employers still offer the accounts with a grace period.
According to the FSAstore.com, an online store that specializes in selling F.S.A.-eligible items, more than a third of visitors to the site say they don’t know which option their employer offers (employers don’t have to offer either one). So a call to your benefits office is a good idea, said Jeremy Miller, the store’s founder and president.
If you do have a balance to spend, a range of items qualify for purchase. In addition to staples like contact lenses and solution, breast pumps and knee braces, high-tech items are popular purchases, Mr. Miller said. These include smartphone-enabled blood pressure monitors, as well as electrotherapy devices, which are used to ease pain through electrical impulses.
More traditional items include sunscreen, first aid kits, thermometers and shoe insoles for arch support.
Here are some questions and answers about flexible health spending accounts:
■ How much money can I set aside in my F.S.A.?
For 2016, the maximum that can be set aside is $2,550, the same amount as last year.
■ Can I pay for over-the-counter medicines with F.S.A. funds?
Flexible spending account money generally cannot be used to pay for over-the-counter drugs like allergy medication and pain relievers — unless you obtain a prescription for them from your doctor.
■ Is a flexible spending account the same as a health savings account?
Health savings accounts are also aimed at helping people manage health costs with pretax money, but they function a bit differently. F.S.A.s. are available only through employers, while H.S.A.s are available to self-employed people as well. Also, there’s never a spending deadline with an H.S.A.; all the money you contribute rolls over each year if you don’t spend it and remains yours, even if you get a new job.
