11/05/2021
Smart Year-End Move: Manage Your Employee Benefits
For 2021, employers may provide a 12-month grace period for both types of flexible spending accounts.
by: the editors of Kiplinger's Personal Finance / / Read Article
Get the most from your health spending accounts
If you are worried about losing funds you’ve set aside in a pretax flexible spending account for health or dependent care—perhaps because you put off medical appointments or your kids have been home during the pandemic—relax. Legislation enacted in response to COVID-19 tweaked rules for flexible spending accounts. Instead of losing those funds at the end of the year, employers can modify their plans to allow workers to carry over unused funds through 2022.
Normally, your employer may let you roll over up to $550 of unused funds in a health care FSA for an additional 2½ months (that is, until March 15 of the following year), and you can’t roll over any dependent care FSA funds. But for 2021, employers may provide a 12-month grace period (to December 31, 2022) for both types of flex accounts. That’s particularly significant for dependent care spending accounts, because Congress allowed those FSA holders to sock away up to $10,500 of pretax wages in 2021, up from the standard limit of $5,000.
