What’s New with Flexible Spending Accounts
Keeping more in your pocket…..
Flexible Spending Accounts (FSAs) are more compelling than ever now that the government has modified its “use-it or lose-it” rule. You can now rollover up to $500 of unused Health Care FSA funds at the end of the plan year, to be used the following plan year.
Health Care FSAs have always been a great way for you to budget for out-of-pocket health care expenses. Contributions to the Health Care FSA are deducted from your paycheck on a pre-tax basis – reducing your taxable income and increasing your spendable income by an average of 30% of your annual contribution. The government has modified its use-it or lose-it rule to allow up to $500 of unused Health Care FSA funds to rollover for use in the following plan year. Now, you can maximize your tax savings by maximizing your Health Care FSA contributions up to the $2,500 annual limit.
The benefits of the new FSA rule:
- Rollover up to $500 of unused Health Care FSA funds to the following plan year
- The rollover amount does not affect the following year’s maximum contribution amount. You can still contribute up to the maximum allowance of $2,500
- Maximize your tax savings by increasing your contribution
- The new rule does not affect the March 15th deadline to submit claims
- Your entire annual election is still available at the beginning of the plan year
The risk of forfeiting funds has been greatly reduced. The stress of choosing the “right” election amount has been reduced. Increasing your contribution amount will automatically increase your tax savings. Enroll during Open Enrollment (Nov 1st-14th) to enjoy the benefits of the new Health Care FSA rollover provision for 2015.