Use enrollment season to educate about flexible spending accounts (FSAs)
Flexible spending accounts (FSAs) continue to garner significant interest and questions from employees during open enrollment. But open enrollment doesn’t have to be complicated. The following tips can help employers to educate their workforce about the benefits of these tax-advantaged accounts.
Tips for Employers
Last year, the U.S. Treasury Department and IRS made some favorable changes to FSAs by altering the long-standing “use it or lose it” rule, allowing employers to offer a carryover of up to $500 in unused FSA funds to the following year or to continue a grace period option giving a two-and-a-half month extension to spend remaining FSA funds. FSAs cannot have both a carryover and a grace period option, and employers are not obligated to offer either extension.
Employers should consider their options:
- If you recently changed your plan documentation to allow for a carryover option, communicate to your employees about this feature before and during open enrollment. Employees may not be aware that they would be able to carry over up to $500 in unused FSA funds to the next year.
- If choosing to keep the grace period option, emphasize in your benefit communications that employees should keep track of their plan-year deadlines and use their available balance during the year to avoid forfeiting FSA funds.
- Educate employees about FSA-eligible expenses covered by their plan, including qualified medical services and medical products for themselves and their dependents, to reduce confusion and promote use of this benefit.
- Offer an FSA debit card to lower the amount of paperwork participants must fill out for reimbursement.
- Point employees to an online FSA calculator and other resources that will help them understand their account better.
Tips for Employees
Open enrollment communications are an opportunity to provide employees with the following pointers on FSA use:
- Learn about plan extensions. Check if your FSA offers a carryover option or a grace period.
- Keep track of deadlines. Be aware of how much you contribute to your FSA and how much you’ve spent per month by checking your account balance throughout the year.
- Research eligible expenses. Read your plan guidelines to know what your FSA plan covers in terms of qualified products and services.
- Calculate your contribution. Use an online FSA calculator to estimate yearly expenses and learn about the savings available to you through these plans. If you’re unsure about how much to set aside, go for a conservative estimate, but know that you can contribute up to $2,500 in pretax funds per FSA account.
- Ask questions before open enrollment. Open enrollment can be stressful, but if you are well-equipped by understanding the plan, coverage and reimbursement policy, then enrolling will be a breeze.
In addition, here are some ways for employees to use their accounts that they may not be aware of:
- Prep for warm weather travel with sunscreens and other FSA-eligible products.
- Relieve muscle pain and keep moving with hot and cold packs.
- Update a first-aid kit for your home, office or car.
- Schedule annual dental and vision exams, and use your FSA to cover out-of-pocket expenses related to these visits.