Toward the end of the year, many employees become concerned about losing money in their health care 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. Health care account participants may carry over up to $500 for use in the next year, so long as they have accounts for that following year.
The use or lose feature typically is not a major concern regarding dependent care FSAs because those expenses typically are predictable and the funds come in and go out on a pay as you go basis. Also, 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.