As the end of the year approaches, it's a great time to remind employees to take full advantage of their Flexible Spending Account (FSA) benefits. FSAs allow employees to set aside pre-tax dollars to cover eligible medical, dental, vision, and dependent care expenses, providing significant tax savings. However, FSAs operate under the "use it or lose it" rule, meaning any unused funds are forfeited at the end of the plan year unless specific plan provisions allow otherwise.
Here’s how you, as an employer, can help employees understand and maximize their FSA benefits while avoiding potential confusion or frustration.
Explain the Rules Clearly
Not all employees are familiar with FSA rules. Ensure they understand that unused funds may be forfeited unless your plan includes a carryover or grace period. A carryover allows employees to carry over a portion of unused funds (up to $610 for 2024) into the next plan year. Alternatively, a grace period may allow them to spend remaining funds for a limited time after year-end, typically up to two and a half months. Your plan may or may not include one of these provisions.
Send reminders if your plan includes them. For employees uncertain about their balances, encourage them to check their FSA accounts now to plan their spending before time runs out.
Provide Examples of Eligible Expenses
Employees may be unsure about what qualifies as an eligible expense. Help them by offering examples, such as:
- Prescription medications and over-the-counter treatments.
- Vision care, including eyeglasses, contact lenses, and exams.
- Dental services such as cleanings, fillings, and orthodontics.
- Medical equipment, like blood pressure monitors or first aid kits.
- Certain dependent care expenses, such as daycare or after-school programs.
Encourage employees to review their family's potential needs, schedule appointments, or purchase necessary items now to ensure they’re using their funds effectively.
Address the Importance of Timely Reimbursement
Remind employees to submit reimbursement requests promptly for any eligible expenses they’ve already incurred. Provide clear instructions on how to submit claims, what documentation is required, and the deadline for submission. Many plans set a deadline for claims several months into the new year, but employees should not delay.
Additionally, caution employees about using FSA debit cards for prior-year expenses in the new year. These cards typically cannot be used for expenses incurred in the previous year, and doing so may cause administrative complications. Instead, they should submit reimbursement requests for prior-year expenses through the proper channels.
Promote the Value of FSAs
Year-end communication is also a chance to highlight the value of FSAs for tax savings and to encourage employees to participate during the next year.
Conclusion
Helping employees use their FSA funds efficiently benefits both the workforce and your organization. Employees save money on eligible expenses, and your company strengthens its benefits program reputation. By providing clear communication, examples of eligible uses, and reminders about deadlines, you can help employees maximize their FSAs and avoid unnecessary forfeitures. Contact BAS at solutions@basusa.com for information about FSA plans services if you want to implement the benefit in the next plan year.
Benefit Allocation Systems (BAS) provides best-in-class, online solutions for: Employee Benefits Enrollment; COBRA; Flexible Spending Accounts (FSAs); Health Reimbursement Accounts (HRAs); Leave of Absence Premium Billing (LOA); Affordable Care Act Record Keeping, Compliance & IRS Reporting (ACA); Group Insurance Premium Billing; Property & Casualty Premium Billing; and Payroll Integration.
MyEnroll360 can Integrate with any insurance carrier for enrollment eligibility management (e.g., Blue Cross, Blue Shield, Aetna, UnitedHealth Care, Kaiser, CIGNA and many others), and integrate with any payroll system for enrollment deduction management (e.g., Workday, ADP, Paylocity, PayCor, UKG, and many others).
