Benefits 101 Article: What Happens to my FSA/HSA at the End of the Year?
As the air gets cooler, the leaves change color, and your neighborhood coffee shop adds pumpkin spice lattes to the menu, one thing is clear: fall is well and truly upon us. Just a few more months, and it’ll be time to say goodbye to this years’ elections, and hello to the elections of 2021.
But what will happen if you haven’t spent all the money you elected to your FSA or HSA account? While it’s true your FSA and HSA have plenty in common, they also have quite a few important differences (which we’ve written about here), and what happens to your elections at the end of the year is one of them. Here’s what you need to know:
HSA elections are fairly straight forward — if you have any money left in your HSA at the end of the year, it will roll over into the next year (and the next, and the next).
In other words, even if you over-budgeted for your HSA this year, that’s no problem! Although you can’t get that money back, it will roll over into your HSA election for 2021, so you’ll be able to spend whatever you elect on top of whatever rolled over. Keep that in mind when you’re choosing your election — while there’s nothing wrong with electing as much as you can ($3,600 limit for an individual), you may choose to elect less if you expect to have a lot left over.
With FSA elections, things aren’t quite so simple. First and foremost, what happens to your election at the end of the year will depend on what kind of FSA you have, so make sure you understand the kind of plan you’re enrolled in. This can get a little confusing, but you can break FSA plans down into three basic categories:
Health Care FSA with carryover: You can carry up to $500 into the next plan year, but will lose any amount over $500.
Health Care FSA with grace period: You will have 2.5 months after your plan year ends to spend whatever is left in your account, at the end of which you will lose any unspent funds.
Standard Health Care FSA: You will lose any money left unspent at the end of your plan year.
The take home here is that even if your FSA allows some funds to roll over, it will be for a limited period of time, so your best bet is to A) budget your FSA thoughtfully and B) spend whatever you have left over stocking up FSA-eligible purchases — here are a few you might not have thought of!
How to Be Prepared
Obviously, end of year account balance is more important to consider in an FSA than in an HSA. But regardless of which type of account you have, there are a couple things you can do to ensure you’re as prepared as can be when January rolls around.
First and foremost, make sure you understand the basics of your account. We have a few resources here on our website, but always feel free to reach out to your provider or HR with questions, especially if you’re enrolled through your employer.
Second, there’s no need to spend hours poring over the books, but a little budgeting does go a long way when it comes to getting the most out of your benefits. Think about what your big expenditures will be for this year, and plan accordingly: that way, you’re less likely to find yourself way under-budget.
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