What does this mean for your wallet?
A flexible spending account (FSA) allows an employee to
set aside a portion of their paycheck to pay for qualified medical, health and dependent
expenses. Money placed into an FSA is not subject to payroll taxes, resulting
in savings to the employee. The money not used in an FSA at the end of the year
is lost to the employee.
A new 2013 contribution limit only allows employees to
deposit a maximum of $2,500 into their account per tax year. Employer contributions
to employee FSA accounts are not included in the $2,500 limit. The $2,500 limit
does not apply for plan years that begin before 2013; therefore, if your company’s
plan year is July–June, the $2,500 limit will not begin until July 2013.
Some plans offer a grace period that gives you extra time
to claim FSA money before losing it. The grace period might give you up to two
months and 15 days after the end of the plan year. Unused contributions to the
FSA for plan years beginning in 2012 or later that are carried over into the
grace period for that plan year will not count against the $2,500 limit for the
subsequent plan year.
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