Q.- We have a calendar year health FSA with a grace period for incurring claims. An employee has a balance in his FSA for the 2021 plan year but did not elect to participate in the plan in 2022. Can he still incur claims during the grace period and be reimbursed from the 2021 leftover account? Or, does he have to participate in 2022 in order to be reimbursed for expenses incurred through March 15, 2022?
A.- A grace period applies to anyone who was a participant in the FSA on the last day of the plan year. A plan cannot restrict the grace period to only those who elect to participate in the subsequent plan year. Therefore, the employee may use expenses incurred between 1/1/2022 and 3/15/2022 to spend down his 2021 plan balance.