Buzz
If your company provides a flexible spending account (FSA) with a 2-1/2-month grace period for using your 2020 funds, make sure you use them before March 14th, when the grace period ends. You have until Monday to spend on eligible healthcare costs; after that, any remaining balance will be lost.
Last-Minute 'Use It or Lose It' Spending Tips
With an FSA, your employer sets aside pre-tax dollars to cover health-related or dependent-care costs like glasses, over-the-counter medications, or dental visits. Essentially, it's like receiving a 30% discount on your usual expenses.
If you're unsure whether your plan offers a grace period, reach out to your employer. If it doesn't, ask if your FSA includes a rollover option, which lets you carry over up to $550 into the next year (you can either have a grace period or a rollover, but not both).
If you have a grace period but aren't sure what to buy with your expiring funds, take a look at the list of options at the bottom of this Mytour post (when in doubt, stock up on Aspirin!).
Other FSA Exceptions
The December 2020 pandemic relief bill expanded certain FSA regulations, though your employer isn’t required to adopt these changes. Nonetheless, it's worth checking if they apply to your plan. According to legal news site JD Supra, the changes include:
Extended carry-over and grace periods for 2021 and 2022. Balances up to $5,000 (for families) at the end of 2020 can be carried over into 2021, and any remaining balance at the end of 2021 can roll into 2022. Grace periods are also extended from 2.5 months to the end of the full calendar year (i.e., you can use your 2020 funds through all of 2021).
FSA elections are no longer irrevocable for the 2021 plan year. Employers may allow employees to make changes to their FSA elections mid-year without a qualifying event or change in status during 2021.
Employers may permit terminated employees to continue using their FSA until the end of the plan year in which their participation ends, plus any grace period.
At the very least, the new legislation relaxes some IRS restrictions, but you should confirm with your employer when and if these changes will apply to your specific FSA plan.
