Uncle Sam takes a huge chunk of your income each year. It makes sense to use various tax advantages to lower your total tax bill. Flexible spending accounts allow you to pay for health and childcare expenses with pre-tax dollars, reducing your total income for the year. You enroll in an FSA during your health benefits open enrollment period. Once enrolled, you cannot make changes without a qualifying event.
Flexible Spending Accounts
You may participate in two types of FSA plans: childcare and health. You make payments at each pay period into the account to cover the eligible expenses. Once enrolled, you get full access to the entire contribution on January 1. As you incur expenses, you submit receipts to your plan provider and are reimbursed. Any amount left in the account at the end of the year is lost if you do not use it. Some employers offer a two-month grace period at the beginning of the year to submit eligible expenses for the prior year.
The Internal Revenue Service writes the rules and regulations regarding flexible spending accounts including the rules for cancellation. FSAs are valid for the plan year that runs from January 1 to December 31. Once enrolled, you can't cancel your contributions to the plan mid-year without a qualifying event.
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A qualifying event is a change in life status including marriage, a birth, an adoption or a divorce. You must provide documentation of your qualifying event in order to cancel your contributions to your account. You have 30 days after the qualifying event occurs to make changes to your health plan and FSA accounts.
Your FSA account is only good while you are employed with the company. Once your employment is terminated, the account and the funds are no longer available to you. You don't have to pay back any funds covered over what you contributed to the account, but you lose any contributions. You may extend your FSA coverage with COBRA coverage, but you must continue making your contributions out-of-pocket.
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