Can you still get reimbursed for 2024 benefits plans? Here’s what to know
If you’re one of the millions of Americans who have access to flexible spending accounts at work, you’re in luck. These powerful tools can help you manage some of life’s biggest expenses – dependent care and health care products and services – tax-free.
Each plan has different guidelines – including deadlines – and each may be different from employer to employer, even year to year. Since some of those deadlines fall in March, here’s what you need to know now about your flex spending accounts.
Medical flex spending accounts are fairly flexible
Flexible spending accounts for health care used to have a “use it or lose it” rule within the calendar year of the benefit, but those rules have been relaxed. Now, employers typically offer one of two options for employees: the ability to carry funds into the next year, or a grace period for reimbursement.
It’s critical that you check to see which option applies to your plan, said Jesse Hansen, senior employee benefits attorney at OneDigital, a benefits consulting firm. If you have the carryover option, any balance you have left over at the end of a calendar year, up to the IRS maximum, goes into your account for the following year, giving you an additional 12 months in which to spend the funds. The maximum you could carry into 2025 is $660.
If your plan has a grace period, you have until March 15 to incur costs and until March 31 to submit reimbursement requests. If you’re in that situation, now is the time to act, said Eileen Loustau, a financial adviser with Bay Area-based Arcadian Associates.
Start by checking receipts from last year to see if anything you already bought qualifies as FSA-reimbursable – or go ahead and spend those funds now in the final days before the March 15 deadline.
You probably know that all kinds of health care expenses, from aspirin to X-rays, may qualify. To be absolutely sure, check the IRS website, or look at the dedicated FSA sections of many big retailer websites. Here’s Target’s. A company called FSAStore.com offers nothing but items that are eligible for reimbursement, making it a great place to browse for inspiration, Loustau suggests.
Strategies for using your FSA
If you find that you have unspent FSA funds in the first few months of the new year, it’s unfortunately usually too late to adjust your current year’s contributions unless you change jobs. But now that you know, you can plan accordingly for the following year and consider contributing less in the future.
On the other hand, if you’re able to carry over your prior year’s funds, you may want to do so strategically if you have a large medical expense – say an elective surgery – that's coming up, said Loustau.
HSA vs. FSAs
If you find that you struggle to spend all the funds you’ve set aside for your FSA, you may want to consider a health savings account (HSA) instead. HSAs have no deadlines for reimbursement, meaning you can roll the funds over indefinitely.
But HSAs come with other fine print. For one thing, you must be enrolled in a high-deductible health insurance plan, which may not be the best option for everyone.
What’s more, if you’re moving from an employer-sponsored FSA to an HSA and you have any money left in your FSA account, you won’t be able to contribute to your HSA, let alone start to draw money out as reimbursements, until those funds are zeroed out, Hansen cautioned. There may be some exceptions, but in general, it may be best to avoid putting yourself in that position.
Dependent care reimbursement accounts
Flexible spending accounts for dependent care don’t offer as many options as those for health expenses. Your funds need to be spent during the calendar year that the benefit covers, although you may have a grace period in which to submit reimbursements.
Luckily, it’s generally easier to estimate ahead of time how much you’ll need to contribute to dependent care than to health expenses. “We don't see people losing their dependent care balances nearly as often,” Hansen said. “We see much more often that they wish there was a significantly higher limit because of the high cost of day care.”