Money :: Flexible Spending Accounts

Flexible Spending Accounts

IRS Allows FSA Carryovers for Two Years

The use-it or lose-it rule has been set aside for the 2020 and 2021 plan years. XPO is automatically carrying over any unused Flexible Spending Account (FSA) funds for you. Please review the IRS Allows FSA Carryovers for Two Years section below for important information.

Health Care FSA

If you enroll in the Basic PPO or Classic PPO, you can open a Health Care FSA and contribute up to $2,750 tax free from your paycheck to reimburse yourself for out-of-pocket expenses, such as your portion of the medical deductible, prescription drugs, and eligible dental and vision expenses. The full amount you elect during enrollment is available, so you can start reimbursing yourself for eligible expenses from this account immediately. Please review the IRS Allows FSA Carryovers for Two Years section below for important information.

Dependent Day Care FSA

The Dependent Day Care FSA allows you to set aside up to $5,000 if married filing jointly (up to $2,500 if married filing separately) tax free for eligible day care costs for children under age 13 or dependent parents. This account cannot be used to reimburse health care expenses for your dependents — only to reimburse the cost of day care for your eligible dependents. Day care expenses include nursery schools, day care centers, adult day care centers, in-home providers and before- and after-school care.

You can contribute up to the IRS maximum through payroll deductions. Unlike the Health Care FSA, you can only be reimbursed with money actually in your account. This means you may want to wait before submitting your expenses until you have accumulated enough money in your account.  Please review the IRS Allows FSA Carryovers for Two Years section below for important information.

Please note: The IRS limits the amount highly compensated employees can contribute to the Dependent Day Care FSA. If your annual pay is $130,000 or more, your contributions will be capped at $750 in 2021.

Regardless of your income, consider consulting your tax advisor on how to get the full child care tax credit on your tax return.

IRS Allows FSA Carryovers for Two Years

The Taxpayer Certainty and Disaster Tax Relief Act of 2020 (the Act) was signed into law December 27, 2020. The Act allows FSA carryovers for the 2020 and 2021 plan years. Here’s a look at the normal rules, the special rules currently in effect and what we expect to happen in the future.

Normal FSA Rules

Normally, any balance remaining in your HCFSA or DCFSA at the end of a plan year (January 1 through December 31) is forfeited. This is called the “use-it or lose-it rule.” You normally have a grace period from January 1 through March 31 of the following year to submit claims for eligible expenses incurred during the previous plan year. That grace period is being replaced for the next two years by the carryover, described below.

Special FSA Rules — Plan Years 2020 and 2021

In short, the use-it or lose-it rule is set aside for two plan years. The Act allows XPO to carry over any unused FSA account balances for the 2020 and 2021 plan years into the next plan year. You can use the carryover amounts on claims incurred in the new plan year.

Return to Normal FSA Rules — Plan Years 2022 and Beyond

We expect the use-it or lose-it rule to be reinstated for the 2022 plan year, along with the March 31, 2023 grace period deadline for submitting claims for eligible expenses incurred in 2022.

Consider a Flexible Spending Account

Watch this video to learn how to manage your account and how FSAs save you money on health care and dependent day care expenses.

Contacts

PayFlex

FSA and CSA administrator (as of January 1, 2021)