Flexible Spending Account FSA Carryover Rules Checklist

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Here are the Flexible Spending Account (FSA) Carryover Rules:

1. Pre-2020 rules: Employers could opt to allow a $500 carryover, which means employees could roll over up to $500 of unused FSA funds into the next plan year.
2. 2020 CARES Act changes: The Coronavirus Aid, Relief, and Economic Security (CARES) Act allowed employers to permit FSA participants to carry over up to $550 of unused FSA funds into the subsequent plan year for plan years ending in 2020 or 2021.
3. 2022 inflation adjustments: For plan years starting after December 31, 2021, the maximum carryover amount will be $5,850 (previously $5,000).
4. New rules for non-Health FSAs: Starting January 1, 2020, employers can choose to allow participants in non-health FSAs (e.g., dependent care or commuter plans) to roll over up to the same carryover amount as health FSAs ($500 in 2019 and increasing annually based on inflation).
5. Carryover election: Employers must make a specific election to permit FSA carryovers for a plan year.
6. Carryforward rules: If an employer chooses to allow carryovers, it will need to determine which funds are eligible (e.g., only unused, unreimbursed expenses) and specify the carryover amount in their plan documents.
7. Required notice: Employers must provide participants with written notice of the FSA carryover rules by March 15th for the preceding plan year.

Implementing a Flexible Spending Account (FSA) carryover rules checklist can benefit your organization in several ways:

• Reduced administrative burden: A clear and consistent application of carryover rules helps to minimize disputes and paperwork, freeing up HR resources for more strategic initiatives.
• Improved employee satisfaction: When employees understand how their FSA contributions will be handled from one year to the next, they're more likely to feel secure and satisfied with their benefits package.
• Increased employee engagement: A well-structured carryover policy can foster a sense of continuity and stability among employees, which can lead to higher job satisfaction and reduced turnover rates.
• Better compliance with regulations: A checklist ensures that your organization is meeting the necessary requirements for FSA administration, helping to avoid penalties and reputational damage.
• Enhanced financial planning: By carrying over unused FSA balances into subsequent years, employees can better plan their expenses and make more informed decisions about their benefits.

Here is a possible answer:

1. Total contribution limit
2. FSA carryover amount calculation
3. Eligible expenses coverage
4. Rollover vs carryover distinction
5. Health FSA and dependent care FSA rules
6. Grace period requirements (if applicable)
7. Employer notice and communication guidelines