Essential year-end tips for maximizing Flexible Spending Accounts
As the year draws to a close, it’s important that both employers and employees focus on year-end planning for spending accounts. Proper communication from employers on how to manage these accounts before the year ends ensures that employees maximize their benefits and avoid losing any unused funds.
Incur FSA expenses before the end of the year
One of the most important aspects of year-end planning for Flexible Spending Accounts (FSAs) is the “use it or lose it” rule. Depending on your employer's plan design, employees must incur eligible expenses before the plan year's end or soon thereafter, to avoid forfeiting any remaining money in the account. You can help your employees by sending reminders through various channels such as email campaigns, company newsletters, and internal communication platforms. Highlighting common eligible expenses in such communications – like medical co-pays, prescription medications, and dental and vision care – can also help employees in utilizing their healthcare FSA funds effectively. Additionally, remind employees that they can use their healthcare FSA dollars on popular items such as sunscreen, insect repellant, calamine lotion, first aid kits, and cold and flu care products. By providing this comprehensive information, you can ensure employees make the most of their FSA benefits.
Carry-over and grace period provisions
Understanding the provisions for the carry-over and grace period is essential for employees in maximizing healthcare FSA benefits. The carry-over provision allows employees to carry over a certain amount of unused healthcare FSA funds into the next plan year, while the grace period provision extends the deadline to incur eligible expenses for up to an additional two and a half months. Clearly communicate which provision applies to your plan and how your employees can take advantage of these options to avoid losing their funds.
Deadlines to submit reimbursement claims
Employees should stay aware of the deadlines for submitting FSA reimbursement claims to ensure they do not lose the money in their account. Typically, there is a run-out period after the plan year ends during which employees can submit claims for expenses incurred during the plan year. Provide clear information on these deadlines and encourage your employees to keep receipts and documentation for all eligible expenses. Regular reminders and accessible FAQ’s can help them stay on top of these deadlines.
Debit card “gotchas”
While using FSA debit cards can be convenient, there are some pitfalls that employees should be aware of (especially when it comes to paying for expenses incurred in the previous year). Employees should be cautious about using their FSA debit cards in the new plan year (2025) to pay for expenses from the previous year (2024), as this can lead to complications and potential denial of claims. Offer guidelines on the correct use of FSA debit cards and advise your employees on how to best handle transactions that span different plan years to help avoid any issues.
Effective year-end planning for spending accounts is essential for maximizing the benefits these accounts offer. You, as an employer, play a crucial role in communicating important information and deadlines to your employees, ensuring they are well-informed and able to make the most of their accounts. By taking proactive steps and providing clear guidance, you can help your employees achieve greater financial well-being and job satisfaction as they welcome the new year.