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We've updated one of our most popular materials. See what's new in our guide to MERPs.

A Guide to Flexible Spending Accounts

FSA Rules and Requirements

This section outlines Health Flexible Spending Account (FSA) rules and requirements.Flexible_spending_accounts_rules_requirements

Health FSA Eligibility

To be eligible for a Health FSA:

  • Your employer must offer an FSA.

  • You must elect enrollment and elect an FSA contribution amount.

  • You do not have to be covered under any other health plan to participate.

Note: Self-employed persons are not eligible for FSAs.

FSA Contribution Rules

Contribution Amounts

For calendar year 2015, the annual FSA contribution limit is $2,550.

Who Contributes

With an FSA, the employee or employer may contribute, though usually it is 100% employee-funded. FSA contributions are made through a Section 125 Cafeteria Plan.

When to Contribute

At the beginning of the plan year, employees must designate how much they want to contribute. Then, the employer deducts the amounts periodically (generally, every payday) in accordance with the annual election. Consistent with other Cafeteria Plan rules, employees can change or revoke elections only if there is a change in employment or family status that is specified by the plan.

FSA Rollover Rules

In the past, FSAs were “use it or lose it,” meaning unused funds were completely lost at the end of the plan year. However, employers now have a choice of allowing employees to:

  • Allow a carryover up to $500 year to year (a limited rollover), or

  • Allow a 2.5 month grace period for spending down FSAs, or

  • Neither

Tip: The FSA rules are outlined in IRS Publication 969, and contribution maximums are adjusted annually by the IRS.

Learn the differences between HSAs, HRAs, and FSAs