EDITOR'S NOTE: A temporary change to federal law allows employees to reimburse eligible 2021 expenses with any leftover money contributed in 2020 to health or dependent care flexible spending accounts. For more details, see this Inside Iowa State story published Jan. 28, 2021.
As the end of 2020 approaches, so does the deadline for incurring expenses that can be paid with a flexible spending account (FSA).
Employees can opt to use a flex account to avoid payroll and income taxes on up to $5,000 in dependent care spending or $2,700 in out-of-pocket costs related to health care (increasing to $2,750 in 2021). The amount to contribute via payroll deductions in the coming year is elected annually during open enrollment in November.
Iowa State's FSA administrator ASIFlex processes claims and reimbursements. Funds are reimbursed when employees file a claim for either their own expenses or those of eligible dependents. Claims must be filed by April 30 of the following year.
The health and dependent care accounts are separate and operate under slightly different rules. Here's what employees should know:
ISU's health care FSA allows a maximum of $550 in unused health care contributions to be carried over to the next plan year. The carryover does not count against the maximum contribution for the year and is added to the available funds. Employees who did not enroll in health flex for 2021 still have access to any carried over funds from the 2020 plan year.
New for the 2021 plan year, ISU's dependent care assistance program (DCAP) will have a "grace period" that extends the amount of time to incur a claim to March 15. Under ISU's current program, only claims incurred during the calendar year are eligible for reimbursement. The change provides an additional 2.5 months to incur a reimbursable claim. Employees who did not enroll in DCAP for 2021 still have access to any unused funds from the 2020 plan year during the grace period.
All claims must be filed by April 30 following the end of the plan year. Any funds that exceed the FSA carryover or aren't used during the DCAP grace period are forfeited and may not be rolled over into another account or refunded. Forfeited funds are used by Iowa State to help defray the administrative costs of the plan.
Check out this FAQ on flex accounts. Employees with questions may contact the benefits team at 294-4800 or firstname.lastname@example.org. For questions about plan rules and the tax impact of these accounts, contact the payroll, benefits and tax office at email@example.com.