In the example, a worker contributes the maximum of $2,750 to her F.S.A. for 2020. She spends just half but, under the temporary rules, carries over the $1,375 balance into 2021. (Under normal rules, the maximum amount for rollover that year would have been $550.)
In 2021, the worker again contributes the maximum of $2,750. She again spends half, and rolls over the remaining $1,375 — plus the $1,375 from the prior year — into 2022.
In 2022, she contributes the maximum — now $2,850. She has so far spent just half the contribution and has $1,425 remaining.
That adds up to a balance of $4,175 ($1,375 plus $1,375 plus $1,425), but the rules now allow a carry-over of just $570 into 2023. The worker may have to spend $3,605 by the year-end deadline, less than four months away, or risk forfeiting the funds.
Workers with an F.S.A. should confirm various deadlines with their employers, Mr. Durso said. While expenditures must be incurred by the deadline, employers may offer a “run out” period of several months after the deadline, during which workers can still submit receipts for reimbursement.
Here are some questions and answers about flexible health spending accounts:
What can I buy with my F.S.A.?
Employees can use their F.S.A. contributions to pay for a broad range of health services and products, including over-the-counter medication, first-aid kits, blood pressure monitors, breast pumps, and menstrual pads and tampons. Covid-related supplies, like masks and hand sanitizer, also qualify. Less commonly known eligible items include deep massage guns favored by athletes, and the cost of buying and maintaining a guide dog or other service pet. Details can be found in I.R.S. Publication 502.
