It’s Not too Late to Save Money with a Flexible Spending Account in 2021

Health and dependent care flexible spending accounts (FSAs) are money-saving resources for you and your family when managed well. However, you may have elected not to have an FSA—or chose to put minimal funds in an FSA—due to the unpredictable nature of 2021 and the rules that stipulate you must use all, or almost all, of the funds in your FSA account by a specified deadline or else you will lose the money.

The FSA rules were altered at the end of 2020 in response to the coronavirus pandemic and the new temporary flexibility has the potential to put money back in your bank account. A summary of the new rules follow:

• You are permitted to create or terminate a health or dependent care FSA mid-year. You can also increase or decrease contributions to an FSA mid-year.
• You cannot undo contributions to an FSA that have already been made.
• You cannot reduce your election for the year to an amount that is less than what has already been contributed or reimbursed.
• You can carry over all unused 2020 health and dependent care FSA funds for use in 2021 and 2022. In years past you could carry over up to $550 in a health FSA and you could not carry over any money in a dependent care FSA.

What does this mean for you? If, for instance, you end up signing a child up for a summer day camp you may be able to use a dependent care FSA and save. Babysitting services while you work or a day care center for children or dependent adults can also be eligible expenses for a dependent care FSA.

A health FSA can be used for out-of-pocket expenses before your HealthFlex deductible has been met, for example. In general, a health FSA can be used for certain eligible out-of-pocket medical, pharmacy, dental and vision expenses.

The savings come from an FSA’s pre-tax structure. If you elect to participate in an FSA, you may set aside part of your paycheck on a before-tax basis to pay for certain eligible health care and dependent care expenses. For individuals enrolled in a HealthFlex HSA plan, we recommend maximizing your HSA contribution before contributing to an FSA.

If you would like to create an FSA, terminate an FSA or modify an existing FSA, please e-mail Wespath at [email protected]. Please also notify your salary paying unit and plan sponsor to make sure all parties are aware of your intentions. Questions? E-mail them to [email protected].