Q.- We had an employee ask us what happens to her health flexible spending account money if she isn’t able to use it all this year. What do we say?
A.- The general rule is that if FSA amounts are not used within the plan year, they are forfeited. However, your plan may be structured with a carryover feature which means your plan allows a certain amount of unused funds to be carried over to be used in the next plan year. Alternatively, your plan may have a grace period feature which means your plan allows your employees to be reimbursed by unused funds for expenses incurred up to 2-1/2 months into the next plan year. After these two possible extensions are considered, your employee will lose any money she does not use in the plan year. You should tell all your employees to budget wisely when determining how much money to contribute to a health FSA.