As a federal employee, you’re able to choose from a selection of Flexible Spending Accounts (FSAs) to pay for certain healthcare expenses that are not covered by your FEHB insurance plan. These plans include a Health Care FSA (HCFSA), a Limited Expense Healthcare FSA (LEX HCFSA), and a Dependent Care FSA (DCFSA).
However, since healthcare FSAs are funded with pre-tax earnings from your federal paychecks, you can no longer participate once you’re retired and receiving your FERS annuity (pension). That’s why it’s important to spend your FSA funds before you retire especially if you’ve been putting off a medical procedure that’s not covered by FEHB.
Overview: How Flexible Spending Accounts (FSAs) Work
A Health Care FSA is a pre-tax account that you can use to pay for eligible medical, dental, and vision care expenses that aren’t covered by your FEHB plan. Since you fund your account with pre-tax earnings to pay for qualified out-of-pocket healthcare expenses, you can lower your taxable income for each year in which you’re enrolled. Even better, you aren’t taxed when you use money from your FSA account to pay for eligible expenses under your plan.
The minimum election for all accounts is just $100 and the maximum contribution is established by the IRS each year.For 2024, the minimum contribution is $100 per person and the maximum contribution is $3,200 per person ($6,400 for a couple). Add to this, you can carry over unused funds in your FSA account from one year to the next when you re-enroll during Open Season. The maximum 2024 carry-over amount to 2025 is $640. For unused amounts in 2023, the maximum carry-over to 2024 is $610.
“Any remaining balances in these types of accounts are forfeited and you will not get a refund.”
FSA Balances Are Subject To Different Rules When You Retire
The balances in your HCFSA, LEX HCFSA, and DCFSA are treated differently if you separate or retire before the end of the year. Your HCFSA or LEX HCFSA will terminate as of your retirement date. This means expenses incurred after that date will not be reimbursed. Any remaining balances in these types of accounts are forfeited and you will not get a refund.
With a DCFSA you can take advantage of a grace period. Any remaining balance can continue to be used to pay for eligible dependent care expenses until your account balance is depleted or the end of the calendar year, whichever comes first. In order to take advantage of the DCFSA grace period, you must be actively employed and making allotments through December 31 of the benefit period. For complete information, go to www.fsafeds.com.
