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It’s a new feature for Health Care Flexible Spending Accounts (HCFSA) and Limited Expense.(LEXFSA). If you haven’t spent all the funds in your health care FSA by December 31st, you can carry over up to $500 into another health care FSA into the subsequent year. This helps you avoid forfeiting your unspent FSA dollars. To use carryover, you must be employed by an FSAFEDS-participating agency and make all of your payroll contributions throughout the year, and you must remember to re-enroll for following year.
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To be eligible to carry over unused funds you must meet the following conditions.
1) You must elect a heath care of limited expense FSAFEDS account for the next calendar year during open season.
2) You must remain employed by an agency that participates in FSAFEDS
3) You must be actively making allotments from your pay through the end of this calendar year
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A Health Care FSA is a benefit that allows employees to be reimbursed on a tax-favored basis for certain medical expenses that are not covered by the employee’s medical plan.
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FSAFEDS is a Flexible Spending Account (FSA) program for Federal employees. It is a voluntary tax-favored program that allows employees to pay for eligible out-of-pocket health care and dependent care expenses with pre-tax dollars. It is an account where participants contribute money from their salary before taxes are withheld, then get reimbursed for their out-of-pocket health care and dependent care expenses. Rules and regulations are governed by the Internal Revenue Service (IRS).
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Prior to October 2013, the IRS required FSA enrollees to forfeit all funds left unclaimed in their flexible spending account at the end of the benefit year, which may include up to a 2-1/2 month grace period if written in the program’s governing plan document. This is the “use it or lose it” rule.
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No. The IRS rule on carry over only applies to health care FSAs. Dependent care FSAs will continue to have a grace period from January 1 to March 15 each year.
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On October 2013, the Treasury and the IRS modified the forfeiture (“use-or-lose”) rule for health care flexible spending accounts (FSAs). FSA programs may now allow their participants to carry over up to $500 of unused health care FSA funds to the next plan year OR allow enrollees up to a 2-1/2 month grace period at the end of the plan year to use the funds in their flexible spending accounts. The IRS rule on carry over only applies to health care FSAs not Dependent care FSAs.
FSAFEDS offers carry over for its Healthcare FSA and Limited Expense FSAs.
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If you elect “Shared Account” processing with your spouse when you enroll. If you and your spouse each participate in FSAFEDS and YOU are NOT the FEHB and/or FEDVIP enrollee, you can have your spouse’s eligible FSAFEDS PR claims processed against YOUR FSAFEDS account when the balance in your spouse's FSAFEDS account reaches zero. Remember, since all claims will be processed until your spouse’s account is depleted, your spouse may not have a carryover account created. This means once your spouse's account balance is depleted, all claims will be processed against your FSAFEDS account, through December 31 of the Benefit Period. Beginning January 1 of the following Benefit Period your claims will revert to being processed against your spouse’s account.
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