Navigating the world of Flexible Spending Accounts (FSAs) can feel like deciphering a secret code. With terms like “rollover” and “renewals” thrown around, it’s no wonder many people have questions. If you’ve ever found yourself scratching your head over your FSA, you’re in the right place. We’re here to break down the most common questions about FSA rollovers and renewals in a friendly and easy-to-understand way.
What is an FSA?
First things first, let’s clarify what an FSA is. A Flexible Spending Account (FSA) is a special account you put money into that you use to pay for certain out-of-pocket healthcare costs. You don’t pay taxes on this money, which means you’ll save an amount equal to the taxes you would have paid on the money you set aside.
What is an FSA Rollover?
A common question people have is about FSA rollovers. Simply put, a rollover is the amount of money from your FSA that you can carry over to the next plan year.
In the past, FSAs were a “use-it-or-lose-it” arrangement, meaning you had to spend all the money in your FSA by the end of the plan year, or you’d lose it. Fortunately, that’s changed! Now, employers can allow you to roll over a certain amount of your unused FSA funds to the next year. For 2024, the IRS allows up to $610 to be rolled over.
How Does the Rollover Work?
Here’s how it typically works: If you have any remaining funds in your FSA at the end of the year, you can carry over up to the allowed limit. This means you won’t lose that money, and you can use it for eligible expenses in the new plan year.
However, not all employers offer this rollover option. It’s important to check with your HR department or benefits coordinator to understand your specific FSA plan rules.
What Happens to Unused Funds?
If your employer doesn’t offer a rollover, there might be a grace period instead. A grace period usually extends up to 2.5 months into the new plan year, giving you extra time to use up your FSA funds. If you don’t use the funds within this period, unfortunately, the unused money is forfeited.
Renewing Your FSA: What You Need to Know
Renewing your FSA is an annual event. During your employer’s open enrollment period, you’ll need to decide how much money you want to contribute to your FSA for the next year.
Here are some tips for renewing your FSA:
- Review Your Expenses: Look back at your healthcare expenses from the past year. This can give you a good idea of how much to contribute.
- Consider Upcoming Costs: Think about any planned medical procedures, prescriptions, or other health-related expenses you might have in the coming year.
- Be Mindful of Limits: For 2024, the IRS limit for FSA contributions is $3,050. Plan accordingly to maximize your tax savings without over-contributing.
Can You Change Your FSA Contribution Mid-Year?
Generally, you can’t change your FSA contribution amount outside of the open enrollment period unless you experience a qualifying life event. These events can include marriage, divorce, the birth of a child, or a significant change in employment status.
Why Should You Care About FSAs?
FSAs offer significant tax savings. By contributing to an FSA, you lower your taxable income, which can save you money. Plus, you have a dedicated fund for healthcare expenses, which can be a financial relief when those costs arise.
How HRDelivered Can Help
At HRDelivered, we understand that managing your FSA can be confusing. Our team is here to help you navigate the intricacies of FSAs, from understanding rollover rules to maximizing your benefits during open enrollment. Whether you need assistance with your FSA or any other aspect of your benefits package, HRDelivered has got you covered.
Navigating FSAs doesn’t have to be a headache. With the right information and support from HRDelivered, you can make the most of your FSA and enjoy the benefits it brings to your financial health.
