How to avoid forfeiting funds
It's benefits open enrollment season for many employees! At this time of year, it's good to plan wisely to get the biggest bang for your buck using the pre-tax power of the Flexible Spending Account (FSA).
Today we'll discuss the BESTflexSM Health Care FSA Plan and its Runout, Rollover and Grace Period. Understanding how your plan works helps you spend wisely.
If your employer offers a health insurance plan, you may have a health care Flexible Spending Account (FSA) such as the BESTflex Plan.
The IRS allows you to use your BESTflex Plan health care FSA to elect pre-tax dollars from your paycheck to reimburse miscellaneous health care expenses not covered by insurance (such as copays, coinsurance, deductibles, lab fees, medical equipment, etc.)
At the end of a plan year, what happens with my BESTflex Health Care FSA funds?
For example, if you elected $1,000 for the Plan year and only managed to use $700 so far, what can you do to prevent losing the remaining $300?
Any unused funds at the end of the Plan year must be forfeited due to IRS rules. That’s where runout, grace period, and rollover come in! Runout, rollover, and grace period are ways your employer lets you use funds from the previous plan year. You just need to know how these plan features work for your particular plan.
The first step to avoid forfeiting your funds is looking up your plan features! Simply log in at www.ebcflex.com. Select “Download My Company Plan.” This will show you your plan's runout period, and any grace period or rollover that you may have.
If you have the BESTflex Plan health care FSA, then you have Plan Runout. Runout is the period of time after your Plan year ends — usually 3 months*— in which you may submit expenses from the previous plan year to be reimbursed from last year’s health FSA funds.
Think of it as an extension to turn in last semester’s homework. Sweet.
The BESTflex Plan health FSA may have a Grace Period, (depending on whether an employer chooses to offer one*.) Grace Period is a 2 months + 15 day-period after the end of a Plan year in which participants may incur new expenses but be reimbursed with last year’s FSA funds. With Grace Period, you can think of your Plan year as one big year — lasting 14 months and 15 days!
According to IRS rules, a Plan that has Grace Period cannot also have Rollover, which we’ll talk about next.
The government allows one more way to avoid forfeiting your BESTflex Plan health FSA cash at the end of the Plan year: Rollover. If your employer chooses Rollover for your Plan*, you have the ability to roll over up to $500 from one Plan year to the next. Think of it as a special piggy bank you get to bring with you!
If you end up with a lot of funds left near the end of the Plan year and your Plan features Rollover, you should take that Rollover amount into consideration in planning next year’s election.
But remember, only $500 of unused funds will roll over from your BESTflex Plan health FSA account. (For example: if you have $600 in your account at the end of the Plan year, only $500 will roll over, and $100 will be forfeited.)
If a Plan has Rollover, it cannot also have a Grace Period. (That would be too good to be true!)
*To find the length of your Plan’s Runout and check if your Plan has a Grace Period or Rollover, look in My Company Plan by logging into your Participant account at www.ebcflex.com. Click Menu -> Account Information -> BESTflex Plan, and scroll down to “Download My Company Plan.”