A Flexible Spending Account (FSA) is a type of benefit that employers offer to their employees to help them pay for qualified medical expenses. FSAs are popular because they allow employees to set aside pre-tax dollars from their paychecks to cover these expenses. However, there may be confusion about the difference between FSA plan year and calendar year. In this article, we will discuss the differences between the two and answer some common questions.
Table of Contents
Table of Contents
Introduction
A Flexible Spending Account (FSA) is a type of benefit that employers offer to their employees to help them pay for qualified medical expenses. FSAs are popular because they allow employees to set aside pre-tax dollars from their paychecks to cover these expenses. However, there may be confusion about the difference between FSA plan year and calendar year. In this article, we will discuss the differences between the two and answer some common questions.
What is FSA Plan Year?
FSA plan year is the 12-month period during which you can use the funds in your FSA. This period is determined by your employer, and it does not necessarily have to coincide with the calendar year. For example, your FSA plan year may start on July 1st and end on June 30th of the following year.
What Happens at the End of the FSA Plan Year?
At the end of the FSA plan year, any unused funds in your account will be forfeited. This means that you will lose the money that you set aside for qualified medical expenses but did not use. Therefore, it is important to plan your expenses carefully and not contribute more than you think you will need.
What is Calendar Year?
Calendar year is the 12-month period that starts on January 1st and ends on December 31st. This is the most common way of measuring time, and it is used for many purposes, including tax filing, financial reporting, and budgeting.
What Happens at the End of the Calendar Year?
At the end of the calendar year, any unused funds in your FSA account will not be forfeited. Instead, you may be allowed to carry over a certain amount of funds to the next calendar year, or you may have a grace period during which you can use the funds from the previous year. The carryover amount and grace period vary depending on your employer's plan, so it is important to know the specifics of your plan.
What are the Differences Between FSA Plan Year and Calendar Year?
The main difference between FSA plan year and calendar year is the period during which you can use the funds. FSA plan year may start and end at any time during the year, while calendar year always starts on January 1st and ends on December 31st. Another difference is what happens at the end of the year. Any unused funds in your FSA account may be forfeited at the end of the FSA plan year, while they may be carried over or have a grace period at the end of the calendar year.
Which One Should I Choose?
Whether you should choose FSA plan year or calendar year depends on your needs and preferences. If you have predictable medical expenses and want to avoid forfeiting any unused funds, calendar year may be a better option. However, if you have irregular expenses or want more flexibility in choosing the period during which you can use the funds, FSA plan year may be a better option.
Conclusion
FSA plan year and calendar year are different ways of measuring the period during which you can use the funds in your FSA account. Knowing the differences between the two can help you choose the option that best meets your needs and preferences. Remember to plan your expenses carefully and know the specifics of your employer's plan to make the most of your FSA benefits.
Q&A
Q: Can I change my FSA plan year?
A: No, you cannot change your FSA plan year. It is determined by your employer.
Q: Can I contribute to my FSA during the year?
A: No, you can only contribute to your FSA during open enrollment or within 30 days of a qualifying event.
Q: Can I use my FSA for over-the-counter medications?
A: Yes, you can use your FSA for over-the-counter medications if they are prescribed by a doctor.
Q: Can I use my FSA for cosmetic procedures?
A: No, you cannot use your FSA for cosmetic procedures unless they are medically necessary.
Q: Can I use my FSA for dental expenses?
A: Yes, you can use your FSA for dental expenses, including braces, fillings, and cleanings.
