Flexible Spending Account Facts: Rollover, Runout, and Grace Period
As we find ourselves in benefits open enrollment season, planning wisely and learning about benefits can helpful to get the most bang for your buck. Today we will talk about the BESTflexSM health FSA Plan’s Rollover, Runout, and Grace Period. Understanding these three will help 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. Let’s talk about what happens with BESTflex Plan health FSA funds at the end of a Plan year.
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.)
You are required to forfeit any unused funds at the end of the Plan year per IRS rules. 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? That’s where Runout, Grace Period, and Rollover come in to help.
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.”