FSA Spending Tip: Spend Big in 2021

FSA Spending Tip

If you put off taking care of some expensive healthcare needs in 2020, this year could be the year to get them done. Why? Because if your employer’s plan has full Flexible Spending Account (FSA) rollover, you may have a sizable balance to spend.

Learn more about this FSA spending tip.

FSA Rollover – Relief for Unspent Dollars

As 2020 was coming to an end, many FSA account holders realized that they had not fully used up their whole balance. But in late December 2020, Congress took decisive action to address this problem as part of its COVID-19 relief efforts.

The Consolidated Appropriations Act, 2021 (often referred to as the second stimulus bill) included both stimulus payments and other financial provisions. For example, the Act provided employers with the ability to allow full balance carryover from 2020 to 2021 for health and dependent care FSA accounts. Keep in mind that employers are not required to allow the full balance carryover, or any carryover amount at all; make sure to check with your benefits representative about your company’s plan.

Why is this a big deal?

In a normal year, participants can only carry over up to $550 (increased from $500 in 2020). That meant if you didn’t spend down your balance to below $550, you would lose everything you had left over the carryover amount.

How does full carryover work?

It’s just like it sounds. All unused funds from 2020 will roll over to 2021, if your employer allows.

If you elected $2,000, for example, but only spent $1,000 of it, you still had $1,000 remaining; usually, you would lose $450. If your employer amends its plan for the maximum carryover, you can rollover $1,000.

Let’s say that during open enrollment, you elected the FSA maximum of $2,750 for 2021. With the $1,000 carryover amount added in, you now have $3,750 to spend on qualified healthcare expenses this year.

FSA Spending Tip

Presuming that you have an unusually large balance in your FSA, now is the time to take care of those big-ticket healthcare expenses. Some examples include outpatient surgery, braces, hearing aids, complex eyeglass prescriptions, dental crowns and implants, wheelchairs, and similar products and services.

Remember that you can use your FSA for yourself and your dependents, regardless of their age.

One final FSA spending tip: you can use the full FSA balance on day one of the plan year; you do not have to wait for your contributions to accumulate. The deductions will still be taken out of your paycheck each pay period.

Learn more about the Uniform Coverage Rule.

If you like this FSA spending tip (and want more info on HSAs, HRAs, and COBRA), subscribe to my blog.

Captain Contributor is an employee education program administered by DataPath, Inc.