For employers that offer an FSA grace period, this is the perfect time for HR teams to educate employees about this deadline and how to spend their remaining funds. Here are four key things that employees should understand about their FSA to make the most of the grace period deadline.

The most common FSA grace period is almost here. For FSA holders with a grace period and plan year end date of December 31, 2023, the FSA grace period will run through March 15, 2024. These lucky FSA users get this extra time to continue to spend remaining funds from the prior year on eligible expenses. After March 15, with the exception of a run out period if offered, most people will lose their funds entirely.
Not everyone has a grace period extension, and a grace period is different from a run out. While a grace period gives employees valuable time to spend remaining FSA funds, start by educating them on what this optional extension is and how it works with a run-out period (if your organization offers this). While a grace period allows users to spend funds from the prior year into the new year, a 90-day run-out period gives employees extended time to submit for reimbursement of expenses incurred during the prior year only. Employers can combine a grace period and a run-out period, but cannot combine a grace period with an FSA carry over, which allows users to carry over up to $640 of unspent funds (in 2024) to the next plan year.
FSAs offer significant tax savings: Because FSA contributions are pre-tax, employees can save an estimated 30%, depending on their tax bracket, when they enroll in and use an FSA. An FSA savings calculator can help employees understand their savings opportunity and the impact of leaving unspent contributions in their accounts.
FSA funds can cover a variety of clinical services: If employees have been remiss in scheduling health care visits, the FSA grace period provides some extra time to schedule everything from routine medical and dental appointments to vision checkups to mental health appointments. For example, eligible dental services include bridgework, crowns and caps, dentures, fillings, extractions, sealants, root canals and more. Meanwhile, vision care can include annual exams, laser eye surgery, glasses, contacts, and related supplies. Employees can also use their FSA funds to cover deductibles and copayments, but not insurance premiums.
FSA eligibility includes thousands of everyday health items: Most people have some idea of what they might buy with FSA funds, but there are thousands of everyday health products that your employees may not realize qualify for FSA spending. That list continues to grow, too. In recent years, changes have added eligibility for menstrual care products and expanded eligibility for over-the-counter pain relief and allergy medication. There are other items users might be surprised are eligible, as well, such as an oral light therapy device to ease pain in teeth and gums, or a mask that uses compression and heat to relieve migraine pain. In fact, recent estimates suggest that the average household spends $1,600 each year on items that they could purchase with tax-free FSA funds. You can help employees maximize their money by directing them to a comprehensive eligibility list.

Instant Insights /

Amazing grace: Help employees use the FSA grace period to their advantage

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