Remembering all the rules that govern the healthcare and insurance landscape is hard enough, but now you’ve received a notice that you have a “concurrent flexible spending accounts” or dual FSAs. What does that mean? And how are you supposed to use them so you don’t forfeit money (or forfeit the least amount of money possible)?
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What are concurrent FSAs?
A simple definition is: concurrent FSAs are when you have two active FSAs from different plan years at the same time. There are a few reasons you could have concurrent FSAs: 1. Your employer allows a grace period period in which to use the previous year’s contributions. 2. You have two separate FSAs with two separate employers.
If your employer allows an FSA grace period
The IRS allows employers to give employees up to 2.5 months at the end of the plan year in which to spend any unused FSA contributions from the previous year. This is called a grace period (which is different than a “run-out” period, more on that later). It’s important to note that offering a grace period is optional for employers, and many factors go into the decision of whether or not to offer one. But if your employer does offer a grace period, that’s great news! We’ll tell you how to use it.
- Know how much you have available. Your entire remaining FSA balance from the previous plan year is available to you to use, so check your account.
- Know the timeframe in which you have to use it. The IRS rules state employers can give employees up to 2.5 months after the end of the plan year as a grace period in which to use their remaining balance. Most plans end on December 31st and start over on January 1st. If that’s the case with your FSA, then you have between January 1st and March 15th of the following plan year in which to use your balance. During this timeframe you will have what’s called “concurrent FSAs”. You will have the previous year’s FSA that you’re using during the grace period and your current year’s FSA.
- Know what expenses you can use it for.
- Follow your FSA administrator’s process for grace period expenditures. You might be able to use your FSA debit card or you might have to submit receipts for reimbursement, either way, reach out to your HR department or FSA administrator to find out the appropriate process. That way your expenses get allocated to the correct account.
What’s a FSA “run-out period”?
Your FSA run-out period is additional time to reimburse yourself for expenses incurred during the previous plan year. Your employer gets to choose how long they give you (the most common timeframe is 90 days), during which you want to submit all of the previous year’s receipts you either forgot about or didn’t have time to get reimbursed.
What if I have a run-out period and a grace period?
Lucky you! Since both the run-out period and the grace period apply to the same pot of money (your remaining FSA balance from the previous plan year), you need to know how much you have available for each type of expenses.
- Step 1: Organize your previous year’s receipts. What’s the total of the unreimbursed expenses vs. the account remaining balance?
- Step 2: Submit your previous year’s receipts for reimbursement before the run-out deadline.
- Step 3: If you have any of your previous year’s balance left over, plan which current year expenses for which you will use that balance. Reminder: you can only use your FSA money for past or current expenses, not future expenses.
- Step 4: Submit this year’s expenses for reimbursement before the grace period ends.
What if I have a different FSA provider this year?
If your FSA provider changes at the start of the new plan year, your run-out and grace periods are applicable to the account you had with the old FSA provider. So you’ll want to submit any expenses tied to that account with that administrator.
What if I have two FSAs with different employers?
If you have concurrent FSAs because you are participating in two separate accounts with two different employers, then you can use both accounts as you would if you had one FSA. But you can only reimburse for a health expense once. So you should prioritize which account you want to use first. For instance, if one employer gives you a grace period or allows you to rollover unused funds to the following plan year, and the other doesn't, you should use the FSA without any rollover or grace periods first.
What if both my spouse and I have an FSA?
This isn’t really what we mean by “concurrent FSAs” but, it could be taken that way since you and your spouse can pay for each other’s expenses using both accounts. So it’s like one of you has two FSAs at the same time. If you and your spouse each have an FSA, then you should approach it the same way as the scenario above. You can’t reimburse for the same expense twice so you’ll want to prioritize which account to use first.
Having concurrent FSAs is a great thing as long as you can prioritize your eligible expenses appropriately to make the most of your accounts. Remember that many of the decisions regarding run-out and grace periods are dependent on your employer. So if you have any questions about how your specific FSA(s) run, reach out to your HR department or your FSA administrator(s).
Disclaimer: the content presented in this article are for informational purposes only, and is not, and must not be considered tax, investment, legal, accounting or financial planning advice, nor a recommendation as to a specific course of action. Investors should consult all available information, including fund prospectuses, and consult with appropriate tax, investment, accounting, legal, and accounting professionals, as appropriate, before making any investment or utilizing any financial planning strategy.