FSA: Rollover or Grace Period?

Flexible Spending Accounts often have two options that might need some explanation: “rollover” and “grace period.”

A Flexible Spending Account (FSA) is a special tax-free account money goes into to pay for certain out-of-pocket expenses. Rollover refers to the amount of money put into the account that can roll over to the next plan year for Healthcare FSAs. The grace period is the amount of time, typically 2.5 months, that expenses can be incurred after the plan year ends.

What does that mean?

With an FSA, you must use the money in the account by end of Plan Year; however, a Healthcare FSA may allow up to $500 to roll over to the next year.

A Healthcare FSA or Dependent Care FSA may include a 2.5-month grace period after the end of the Plan Year for any extra expenses to be incurred and submitted for reimbursement.

A plan can have either a rollover or a grace period, but not both. Any unclaimed funds at the end of the run out are lost and returned to your employer.

Content by Lockton Dunning Benefits