Eligible employees, now
is the time to begin planning to take full advantage of their employer’s health
flexible spending arrangement (FSA) during 2017.
(FSA's) provide employees a
way to use tax-free dollars to pay medical expenses not covered by other health
plans. Because eligible employees need to decide how much to contribute through
payroll deductions before the plan year begins, many employers this fall are
offering their employees the option to participate during the 2017 plan year.
Interested employees
wishing to contribute during the new year must make this choice again for 2017,
even if they contributed in 2016. Self-employed individuals are not eligible.
An employee who chooses
to participate can contribute up to $2,600 during the 2017 plan year. Amounts
contributed are not subject to federal income tax, Social Security tax or
Medicare tax. If the plan allows, the employer may also contribute to an
employee’s (FSA).
Throughout the year,
employees can then use funds to pay qualified medical expenses not covered by
their health plan, including 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.
Under the use or lose
provision, participating employees often must incur eligible expenses by the
end of the plan year, or forfeit any unspent amounts. But 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 example, an employee with $500 of unspent funds at the end of
2017 would still have those funds available to use in 2018. Under the grace
period option, an employee has until 2½ months after the end of the plan year
to incur eligible expenses — for example, March 15, 2018, for a plan year
ending on Dec. 31, 2017. Employers can offer either option, but not both, or
none at all.
Have questions visit our website at: www.kaa4tax.com or call (844) KAA-4Tax.
