Fedweek

Toward the end of the year, many employees become concerned about losing money in their flexible spending accounts due to the program’s “use or lose” rules. The reaction in some cases is to attempt to spend down their accounts by making additional reimbursable purchases before the end of the year. In many cases that may not be necessary. Dependent care accounts have a grace period, during which reimbursable expenses may be charged to a plan year, running for 2 ½ months beyond the end of the calendar year. Thus, reimbursable expenses incurred until March 15 still can be charged against this year’s accounts. The use or lose feature typically is not a large factor in dependent care FSAs because those funds typically are predictable and come in and go out on a pay as you go basis, whereas health care account spending is less regular and money accumulates if unspent. Health care accounts formerly followed the same grace period policy, but starting with any unspent 2015 money, participants may carry over up to $500 for use in the next year, so long as they have accounts for that following year. If they don’t, the excess is forfeited.