- Annual election amount — this is the total dollar amount you elect to put into your FSA at the beginning of each plan year.
- Dependent — a dependent is a person whose expenses are eligible for reimbursement through the employee’s FSA. A dependent is usually an employee’s spouse or child(ren) under age 27.
- Eligible expense — items that are reimbursable under the FSA plan are classified as “eligible expenses” according to IRS rule. See a sample list of eligible expenses.
- FICA — taxes collected for Social Security and Medicare benefits.
- Flexible Spending Account (also known as an FSA) — a pre-tax benefit plan that enables the employee to save 30-40% on eligible expenses. By enrolling in this plan, the participant saves on state, federal, and FICA taxes.
- Grace period — an employer-chosen provision that gives you two and a half months after the end of the plan year to incur eligible expenses, as long as you are actively enrolled as of the last day of the plan year.
Health FSA carry forward – an employer-chosen provision allowing up to a maximum of $550 of unused Health FSA funds to roll over into the next plan year. Please note: this maximum can increase in future years. Under the CARES Act of 2020, the maximum roll over amount increases from $500 to $550 for plans who adopt this optional provision. The increase will be indexed in future years (20% of the annual maximum, rounded to the next $10 increment.)
- Open Enrollment — a designated time prior to the start of your plan year during which employees can enroll in the FSA plan and change their benefit elections.
- Plan year — the twelve-month period during which the annual election is effective.
- Run-out period — a period of time after the plan year ends during which participants may submit receipts for expenses which were incurred during the plan year or grace period.
- Uniform Coverage Rule — this rule allows you to access your entire annual election for the Health FSA immediately after the start of the plan year. All other accounts are “pay-as-you-go.” This rule only applies for the Health Flexible Spending Account.
- Use-or-Lose Rule — an IRS rule that states that employees must spend any remaining balance in their FSA by the end of the grace period. If you don’t spend the money, you forfeit it.