Now is a great time to remind your employees how to take full advantage of your health flexible spending account (FSA) plan. Don’t offer this as part of your benefits package? This is still great information to keep in mind when you evaluate your options for the future.
A Health FSA provides employees a way to use tax-free money to pay for medical expenses not covered by other health plans. Eligible employees decide how much to contribute through payroll deductions before the plan year begins. A health FSA can only be offered alongside an employer-sponsored group health plan.
For more general information on FSAs, visit our page by clicking here.
If your business is offering employees the option to participate effective Jan. 1, 2018, time is running out! But here are a few things to know.
Employees who wish to contribute to this type of plan must enroll by Dec. 31, 2017 (even if they contributed in 2017). Reminder: Self-employed individuals are not eligible.
1. 2018 FSA contribution limits.
The IRS announced that employees can contribute up to $2,650 during the plan year. That’s a $50 increase over last year. Amounts contributed are not subject to the following taxes:
- Federal income.
- Social Security.
If your plan allows, you are also able to contribute to your employees’ health FSA.
Under the use-or-lose provision, employees who participate in a FSA must incur eligible expenses by the end of the plan year, or they’ll have to forfeit any unspent amount. However, under a special rule, if you so choose, you can offer employees more time through either the carryover option or the grace period option.
Under this option, your employee can roll over up to $500 of unused funds to the following plan year. To give an example – If an employee has $500 of unspent funds at the end of 2017, he or she would still have those funds available for use in 2018.
Under this option, your employee would have two and a half months after the end of the plan year to incur eligible expenses.
You’re able to offer either option, but not both, or none at all.
3. Spend your 2017 FSA dollars now.
Time is running out – If your employees opened aHealth FSA to cover health care expenses, it’s a great time to remind them not to let those funds go to waste before year-end.
Of course you’re not required to offer an FSA, but if you’d like to learn more about this pre-tax health account, click here to learn more.