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FAQs on 2019 FSAs

Posted on December 10, 2018

Health Flexible Spending Accounts (FSAs) provide employees with a way to use tax-free dollars to pay medical expenses not covered by their health plans. Because eligible employees need to decide how much to contribute through payroll deductions before the new plan year begins, many employers are offering their employees the option to sign up for an FSA this month for participation in 2019.

Here are some Frequently Asked Questions about FSAs:

  • What if you already signed up for FSA in 2018? You must make this choice again for 2019, even if as an eligible employee, you contributed in 2018. (Self-employed individuals are not eligible.)
  • Do you pay any tax on your FSA? Amounts contributed are not subject to federal income tax, Social Security tax or Medicare tax. If the plan allows, an employer may also contribute to an employee’s FSA.
  • How much can you defer to your FSA account? Interested employees may contribute up to $2,700 during the 2019 plan year. That’s a $50 increase over 2018.
  • How does an FSA work? Throughout the calendar year, employees can then use FSA funds to pay qualified medical expenses not covered by their health plan. This includes co-pays, deductibles and a variety of medical products and services ranging from dental and vision care to eyeglasses and hearing aids. Interested employees should check with their employer for details on eligible expenses and claim procedures.
  • What if I don’t use all the money in my account before the end of 2019? Under the use-or-lose provision, participating employees must use their FSA for eligible medical expenses by the end of the plan year or forfeit any unspent amounts.
  • What about the Carryover option? Under a special rule, employers may, if they choose, offer participating employees more time through either the carryover option or the grace period option. Under the carryover option, an employee can carry over up to $500 of unused funds to the following plan year for up to two and a half months after the end of the plan year (March 15, 2020, for a plan year ending on Dec. 31, 2019.)
  • Do employers have to offer FSAs? Employers are not required by the IRS to offer FSAs. Interested employees should check with their employer to see if they are offered and how to sign up.

If you are an individual or a business and need more information about FSAs, additional information can be found in Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans, available on IRS.gov.

Even better, ask your CPA at Teipen Selanders Poynter & Ayres. We know the details and can point you in the right direction for your individual circumstances.