As the end of 2021 approaches and before open enrollment for 2022 begins, here are a few things to note regarding employee flexible spending accounts (FSA).
An FAQ
Answers about flexible spending accounts
- Re-enrollment required. Employees who wish to contribute to an FSA for health care or dependent care expenses must sign up and choose their elections each year. Enrollment and the previous year's elections do not carry over.
- Health FSA carryover. The provision in the federal CARES Act that temporarily eliminated the carryover cap was extended into 2022. All unused funds from the 2021 plan year will carry over into 2022, allowing additional time to incur expenses and use funds that would otherwise be forfeited. The annual contribution limit for plan year 2022 will remain at $2,750.
- More over-the-counter products are covered. The CARES Act also expanded the list of eligible items that can be purchased with FSA funds, including over-the-counter medications and medical supplies, feminine care products, and PPE such as masks and hand sanitizer. This can help maximize your tax savings and reduce your healthcare expenses.
- Dependent care accounts. The grace period for the Dependent Care Assistance Program was extended from March 15, 2022, to Dec. 31, 2022. Any unused funds from 2021 can be used for eligible childcare expenses incurred in 2022. However, the annual contribution limit will go back to $5,000 ($2,500 for married filing separate) for plan year 2022.
- Mid-year changes. The temporary change allowing employees to update their flex account elections mid-year without a qualifying life event will end Dec. 31. As of Jan. 1, 2022, a qualifying event will be required. So, it is important to review current account balances and budget for 2022 when making selections during open enrollment this fall.
For more information on flexible spending accounts, check out the FAQ. Questions about flex plan rules and tax impacts may be sent to the payroll, benefits and tax office, fbac@iastate.edu.
