Addressing America's Retirement Savings Crisis

Flexible Spending Accounts and How They May Be Used

A Flexible Spending Account (FSA) is an account that reimburses an employee for qualified health care or dependent care expenses. These qualified expenses are funded with pre-taxed dollars deducted from an employee’s paycheck.

“Use-it-or-lose-it” Rule

It is required by the Internal Revenue Service (IRS) that an FSA must follow a “use-it-or-lose-it” rule, meaning that any unused funds from the account will be forfeited after the end of the plan year. When an employee enrolls in an FSA plan, the amount contributed for the year must be specified so it is high enough to cover medical or dependent care expenses but not so high that it will be too much to spend and lost at the end of the year. For 2024, the maximum contribution limit is $3,200 for a health care FSA and $5,000 per household for a dependent care FSA. The minimum annual election remains $100.

Employers are allowed to provide an extended deadline of 2.5 months after the plan year ends to use any remaining FSA funds. However, it is optional to implement this and determined fully by the employer.

Additionally, for the 2024 plan year, employers may allow $640 of unused funds to be carried over into the next plan year. Like the deadline extension, this is optional and up to the employer to implement. This may only be used independently and cannot be used while receiving a deadline extension.

What can FSA Funds be Used For?

To ensure that FSA funds are used before the plan year ends, employers may access the FSA Store to find eligible items that may be purchased. The FSA store provides many items for the summer, such as:

  • travel essentials;
  • first aid;
  • menstrual care;
  • acne and skincare;
  • weight loss; and
  • mental health aids.

It is important to remember that FSAs vary by plan design and the eligibility of an expense can be confirmed with your individual plan.

If you have questions regarding a Flexible Spending Account, contact your dedicated Creative Benefits, Inc. team member.