Question

Melba's employer provides a flexible spending plan for medical and dental expenses not covered by insurance. Melba contributed $1,500 during 2014, but by the end of December 2014, she still had $300 remaining in the account. Melba intended to get new eyeglasses, but was too busy during the holiday season. Is Melba required to forfeit the balance in her flexible spending account? Explain.

Answer 1

Melba is not required to forfeit the balance in her flexible spending account. Some employers offer a grace period or a carryover option for unused funds in an FSA.

Step-by-step explanation:

Melba is not required to forfeit the balance in her flexible spending account. A flexible spending account (FSA) allows employees to set aside pre-tax dollars to pay for eligible medical and dental expenses. The money contributed to the FSA is deducted from the employee's paycheck throughout the year. Typically, any unused funds in the FSA at the end of the year are forfeited. However, some employers offer a grace period or a carryover option to allow employees to use the remaining funds.

In Melba's case, she still had $300 remaining in her FSA at the end of December 2014. Whether she is required to forfeit the balance or not depends on the rules set by her employer. If her employer offers a grace period, she may have a certain amount of time in the new year to use the remaining funds. If her employer offers a carryover option, she may be able to carry over the $300 to the new year and use it for eligible expenses. Melba should check with her employer or the benefits administrator to understand the specific rules of her FSA.