2020 Annual Limits for FSA and Limited Purpose FSA $2750
2020 Limits for Transit/Parking – $270/month
2019 Annual Limits for FSA and Limited Purpose FSA – $2700
2019 Limits for Transit/Parking – $265/month
If your plan has a rollover, you may move $500 of unused FSA funds to the following plan year.
The rollover doesn’t affect the following plan year’s maximum contribution amount. You can still contribute up to the annual limit allowed, even if you roll over funds. Your entire annual contribution is still available at the beginning of the plan year.
Run-out periods are not impacted by the rollover.
If your FSA plan has a run-out period, you have an extended time at the end of the FSA plan year to submit receipts for reimbursement. You can only get reimbursed for claims incurred during the previous FSA plan year. The run-out period is usually 90 days after the plan year ends.
If your FSA plan has a grace period, you have up to two-and-a-half months at the end of your plan year to spend unused FSA funds and incur new FSA eligible expenses. Any money that’s leftover at the end of the grace period is forfeited due to the “Use it or Lose it” rule. You cannot cash out any remaining FSA funds, as money can only be used for FSA eligible expenses. For example: If you had a December 31 FSA year deadline, your grace period would allow to use your FSA funds through March 15. A grace period is optional, and the specific deadline also depends on when your plan year ended.
IRS Code Section 152 has a two-prong definition of a dependent – qualifying child and qualifying relative. A qualifying child is any son, daughter, brother, sister, niece, nephew, or grandchild who:
- Will not be age 19 during the year (or 24, if a full-time student). The exception is in the case of a disabled child who is considered as satisfying the age requirement despite their actual age.
- Has the same principal address as the taxpayer for more than half of the year
- Does not provide over half of his/her own support
A qualifying relative is any individual who:
- Is not a qualifying child of any other person
- Has income less than the exemption amount (see your tax advisor for details)
- Receives over half of his or her support from the taxpayer
- If a non-relative, resides with the taxpayer the entire year
Yes. Sterling will provide nondiscrimination testing annually to make sure the employer is in compliance.
Highly compensated employees are defined as:
- One of the 5 highest paid officers
- Own more than 10% of the company
- One of the highest paid 25% of all employees
With few exceptions, almost all employees can participate in the FSA . Exceptions include partners in a business, members of LLCs, and shareholders who own more than 2% in S-corporations. Only employees may participate in a Healthcare or Dependent Care FSA.
Domestic partners are eligible to use an employee’s FSA only if they are also a dependent under IRS Code 152.
FSAs cannot discriminate in favor of highly compensated employees. Annual nondiscrimination testing is required and provided by Sterling.