If your employer offers a Flexible Spending Account (FSA) where you work, time’s running out to secure yours for 2019, and it may be time to decide how much you’d like to contribute.
Used to pay medical expenses otherwise not covered by health plans, FSAs help both the employer secure more tax benefits, and the employee handle bills that normally would not qualify for a tax deduction, such as copays, hearing aids, deductibles, eyeglasses, and other medical expenses.
Any money that is put in is usually considered final and non-refundable, even if there’s some leftover at the end of the year. However, some employers have the option to set up a carryover or grace period plan, giving their employees more time to spend any remaining money.
With the carryover option, any money still left unused at the end of the year can “carryover” into next year’s account balance, while with the grace period option, employees have an additional two and a half months after the year’s end to use up leftover funds, before it’s gone.
Either option is available for employers to implement if they wish, but both can’t be active simultaneously.
Providing an FSA is completely optional for an employer, but it can help both the business and worker save on some taxes, as the funds are not subject to Social Security tax, federal income tax, or Medicare tax. If the employer wishes, he or she may even contribute money into an FSA as well.
So, if you’re an employer, consider opening an FSA plan for your employees before the year’s end, or if a worker, ask your boss to see if flexible spending accounts are provided, and plan ahead how much you’d like to contribute!
Additional information and guidelines for FSAs can be found on Publication 969.