As the coronavirus rages on, it’s easy to lose track of time. If you’re someone with a pile of flexible spending account (FSA) money, you may know the deadline to spend it is approaching, and with fewer ways to spend money on medical expenses or childcare, many folks may be scrambling by year-end. Luckily, there is still time to make a plan for your FSA before time runs out.
This year, the IRS issued new options to make it easier to spend FSA money amid the pandemic. There’s one catch, though: your employer needs to adopt these changes—so you should check with your company to make sure you qualify. Here’s what you need to know.
Make FSA contribution changes
Typically, you can only make changes to your employee benefits during fall open enrollment—but new IRS rules may allow mid-year changes. It may be possible to cut back on health FSA or dependent care FSA contributions, which may free up cash for spending elsewhere. It’s also a chance to reconsider your health insurance. The new IRS rules say your company may allow health plan changes, as well.
More time to spend 2019 FSA rollovers
For those who still haven’t spent their 2019 FSA balance, the IRS has extended the grace period. While your previous grace period for 2019 may have only been until March 15, you now have until December 31 to spend the money.
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Higher rollover limit for 2020
If you can’t spend your entire FSA balance by December 31, there may be some good news: the IRS says you can rollover $550 into 2021, which is $50 more than this year’s limit. While the new rule doesn’t provide a huge increase, it may offer a small cushion for spending next winter.
More ways to spend health FSA money
Another change to know about: you now have more ways to spend your FSA money. The CARES Act has made it possible to spend your balance on drugstore medications—like pain relievers or allergy pills—without a prescription. You may also use FSA funds to pay for costly menstrual products, like tampons, pads, cups, and liners.
