Rules for Healthcare FSAs

Because the money in your Healthcare FSA reduces the amount of income tax you pay, the IRS has special rules on how you can use it. Here is a quick look at these rules:

• Save your receipts. Whether you use your FSA debit card or file an itemized claim form, IRS regulations require that you keep your receipts.
• Meet the deadline. Expenses must be incurred and paid for during the plan year
  (Jan. 1 through Dec. 31).
• No changes. The money you contribute is taken out of your paycheck, in equal amounts, before taxes. Your contribution amounts cannot be changed during the year unless you have a qualifying life event.* Funds cannot be used for expenses you incur after your employment ends unless you elect COBRA for this account.
• Use it or lose it. You have until March 31 of the following year to seek reimbursement for current year expenses or you lose the remaining balance. Make sure you budget carefully. It may be better to underestimate rather than overestimate your expenses.
• No transfers. The Healthcare FSA and Dependent (Day Care) FSA are separate accounts, and you cannot transfer money between them.

*Qualifying life events include marriage, divorce, birth or adoption of your child, your child marries or reaches the age limit allowed for coverage, death of a spouse or child, court order to provide coverage for your child, gain of coverage due to your employment or employment status, loss of coverage due to your employment or employment status, gain of coverage through your spouse or other coverage, and loss of coverage through your spouse or other coverage.