02 Jan Plan now to use a Health FSA in 2019
Now is the time to begin planning to take full advantage of your employer’s health flexible spending arrangement (FSA) during 2019.
Employees have four opportunities to enroll in the company FSA plan: within 30 days of hire date or a qualifying life event (QLE), during the company’s Initial Enrollment period (when the plan is set up), and during FSA Open Enrollment. Start dates for a new individual FSA plans differ for each of these opportunities.
FSAs provide employees a way to use tax-free dollars to pay medical expenses not covered by other health plans. Because eligible employees need to decide how much to contribute through payroll deductions before the plan year begins, many employers are offering their employees the option to sign up for an FSA this fall for participation that begins in 2019.
Interested employees wishing to contribute during the new year must make this choice again for 2019, even if they contributed in 2018. Self-employed individuals are not eligible.
An employee who chooses to participate can contribute up to $2,700 during the 2019 plan year. That’s a $50 increase over 2018. Amounts contributed are not subject to federal income tax, Social Security tax or Medicare tax. If the plan allows, the employer may also contribute to an employee’s FSA.
Throughout the year, employees can then use funds to pay qualified medical expenses not covered by their health plan, including co-pays, deductibles and a variety of medical products and services ranging from dental and vision care to eyeglasses and hearing aids. Interested employees should check with their employer for details on eligible expenses and claim procedures.
Under the use-or-lose provision, participating employees often must incur eligible expenses by the end of the plan year or forfeit any unspent amounts. But under a special rule, employers may, if they choose, offer participating employees more time through either the carryover option or the grace period option.
Under the carryover option, an employee can carry over up to $500 of unused funds to the following plan year — for example, an employee with $500 of unspent funds at the end of 2019 would still have those funds available to use in 2020. Under the grace period option, an employee has until two and a half months after the end of the plan year to incur eligible expenses — for example, March 15, 2020, for a plan year ending on Dec. 31, 2019. Employers can offer either option, but not both, or none at all.
Employers are not required to offer FSAs. Accordingly, interested employees should check with their employer to see if they offer an FSA.