Welcome
Checking My Account(s)
Who We Are
Our Services
FAQ's
Our Investment Policy
MAM Newsletters
Financial Articles
Featured News
Financial Briefs
Articles Of Interest
Research & Tools
MAM Webinars
White Papers
Contact Us
Disclosure

Financial Briefs


More Articles  Printer Friendly Version

 

More Flexibility Allowed In Flex Spending Accounts

Despite the name, “flexible spending accounts” (FSAs) haven’t offered enough flexibility to suit some employees. But now the tide may be turning.

With an FSA, you can elect to allocate part of your salary to a special account for health care or dependent care expenses. Your contributions to the spending plan are made on a pre-tax basis and there’s no tax on withdrawals to pay for eligible expenses.

Sounds like a good deal, right? However, a “use-it-or-lose it” rule for FSAs often has discouraged participation. Under this rule, you must forfeit any funds remaining in the account at the end of the year.

But the IRS relaxed this rule slightly a few years ago, allowing employers to implement a grace period of 2 ½ months after the close of the tax year. For example, if you incurred medical expenses in February, you still could use the funds remaining in a health care FSA from the prior year.

Now the IRS has gone one step further. It says an employer can allow FSA participants to carry over up to $500 of funds left in the account to the following year. But there’s a catch: You can’t use both the grace period and the $500 carryover. It’s one or the other.

Note that the annual limit on contributions to a health care FSA is $2,500, but you can contribute up to $5,000 annually to a dependent care FSA.


Email this article to a friend


Index
When To Disclaim An Inherited IRA
Trust As IRA Beneficiary: Not Crazy
Tax Reform Outlook: Cloudy, With Good Chance Of A Law
Sowing Tax Seeds For Capital Gains
Grandparents Can Become Big Spenders For Their Offspring
Sticking With The Fundamentals
What Would Estate Tax Repeal Mean?
Timely Tax Angles To Dividends
Fate Of Fiduciary Rule Is Uncertain, But Count On Us
Are You Planning To Unleash The Dogs Of The Dow?
5 Retirement Mistakes You Can Fix
The Best Places In The Country To Retire
This Plan Is Just For Nonprofits
Sidestepping A Life Insurance Trap
Teach Employees About Computer Scams

This article was written by a professional financial journalist for McCarthy Asset Management, Inc. and is not intended as legal or investment advice.

©2017 Advisor Products Inc. All Rights Reserved.