Employers considering a Flexible Spending Arrangement are advised to plan now to provide valuable tax advantages to employees for the 2016 Year.
- Throughout the year, employees can 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 2016 would still have those funds available to use in 2017. Under the grace period option, an employee has until 2½ months after the end of the plan year to incur eligible expenses—for example, March 15, 2017, for a plan year ending on Dec. 31, 2016. Employers can offer either option, but not both, or none at all.
Additional information can be found at: https://www.irs.gov/uac/Newsroom/Plan-now-to-Use-Health-Flexible-Spending-Arrangements-in-2016-Contribute-up-to-$2550-$500-Carryover-Option-Available-to-Many-%C2%A0
The IRS publication related to Health Savings Accounts and other tax-favored plans is available at: https://www.irs.gov/pub/irs-pdf/p969.pdf
