What You Need To Know About FSA Rollovers As We Close 2021

fsa rollovers

At the beginning of the plan year, employees decide the annual amount of pretax earnings they’d like to contribute to their flexible spending account (FSA). They then use these funds to pay for qualified health care expenses like copays, prescriptions and eyeglasses. 

But what happens if an employee doesn’t use all the money in their account before the end of the year? Do their unused funds roll over for the next year? Here’s what you need to know about FSA rollovers and the latest contribution limits for 2022.

What is an FSA rollover?

An FSA rollover lets employees roll over unused funds from one plan year to the next. For example, if an employee chooses to contribute $2,000 to their account for the year, but only spends $1,800, they can roll over the remaining $200 to use the next year.

Is there a limit on how much an employee can roll over?

Yes. The maximum rollover amount for employees in 2022 is $570–a $20 increase from 2021.

Who sets the FSA rollover amount?

The employer determines the amount of money employees can rollover based on the limits set by the Internal Revenue Service (IRS)

What is the Consolidated Appropriations Act (CAA)?

In a typical year, employees have a set limit they are allowed to roll over. However, Congress made an amendment to the rules for 2020 and 2021 during the pandemic, allowing employees to roll over all of their unused funds from 2021 into 2022 if their workplace opted into these changes.

Healthcare FSA with rollover

A Clarity FSA lets employees set aside tax-free dollars for health-related expenses not covered by their insurance plan, saving them about 30% on average. Plus, your employees can roll over a portion of their unused funds into next year. This means your employees won’t feel rushed to “use it or lose it” with their FSA contributions. At the end of the year, you can roll over a certain amount of unused funds to the next year. Contact us today for more information.

Sources:

https://fsastore.com/learn-got-timeline-tax-free-healthcare.html

https://www.shrm.org/resourcesandtools/hr-topics/benefits/pages/2022-fsa-contribution-cap-and-other-colas.aspx

http://hrsimplified.com/wp-content/uploads/2021/03/CAA_FAQ.pdf