You made it through open enrollment and the end-of-year benefit crunch for employees; now you can finally take a breath, right? Perhaps. However, there are three remaining flexible spending account (FSA) extensions that could impact your employees: the FSA grace period, balance carryover and runout period.
If your organization offers one of these account features, don’t miss the opportunity to educate employees and, in the process, demonstrate your support for their health and financial well-being.
As inflation continues to wreak havoc on employees’ budgets and spending habits, they’re likely also paying more for healthcare – both in premiums, deductibles, and in the cost of goods and services. For example, employee insurance premiums increased 47% between 2011 and 2021, growing faster than inflation and compensation, and clinical services accounted for more than half of total U.S. healthcare spending.
The FSA your organization offers can help ease the pain of healthcare costs by helping employees reduce taxable income, save money on eligible expenses and make smart money decisions about their health. And deadline extensions give employees and families the extra flexibility they need to ensure they are using and not losing FSA funds.
With this in mind, your benefits team would be well served to educate employees on the following details of their FSA.
Types of FSA deadlines and spending extensions
If your organization offers a medical FSA, you may also offer any of the following spending extensions:
- Grace Period. The grace period gives employees an extra 2.5 months in which to incur new expenses against any remaining FSA funds from the prior plan year. This includes doctor appointments, prescription medications, and thousands of everyday health products. That means, if your plan year ended on Dec. 31, 2022, employees with a grace period have until March 15, 2023, to spend down any remaining 2022 funds.
- Carryover. The FSA carryover allowed account holders to carry over up to $570 in unused FSA funds from 2022 to 2023. This amount increases to $610 for 2023.
- Runout Period. The FSA run-out period gives employees up to three months following the last day of the plan year to continue to submit receipts and claims for qualified expenses that were incurred during the plan year. For example, if your plan year ended on Dec. 31, 2022, the last day of the FSA run-out period would be March 31, 2023; giving employees extra time to submit claims for expenses incurred by or before Dec. 31, 2022.
Unfortunately, even with this extra flexibility, survey data indicates that 37% of account holders with a grace period still forfeit funds. That’s why educating employees about these deadlines and spending extensions is so important.
Your benefits team can also go the extra mile by directing employees to resources like interactive calculators that will help them budget and plan for future healthcare expenses, as well as tools like the searchable eligibility list, so they can explore how to use their tax-free dollars to care for their everyday health or to pay for special healthcare needs. By helping employees understand how their FSA works, you can empower them to make wise choices about their health and their healthcare dollars.