By the People & Culture Team
What is a Flexible Spending Account?
A flexible spending account is a tax advantaged plan that allows you to set aside pre-tax dollars to pay for eligible medical and dependent care expenses. Once you make an FSA election, it is set for the year and cannot be changed without a qualifying event. Funds in your FSA account are use it or lose it.
A qualified transit expense account allows you to set aside pre-tax dollars for commuting and parking expenses. Your transit election can be changed at any time and the funds in the account are yours for as long as you are employed with MCI.
What’s New for 2022?
Flexible Spending Accounts will continue to be administered by Flores.
The IRS increased contribution limits for 2022 – the maximum amount for medical will be $2850. Transit FSA will increase to $280 per month for both commuter and parking benefits. The contribution limit for dependent care is unchanged at $5,000 for married filing jointly, single and head of household files, and $2500 for married filing separately.
Please note that for 2021 only, any unused funds in a medical FSA up to $2750 can be rolled forward into 2022. For a dependent care FSA, any unused funds up to $5000 will roll forward for use in 2022. Keep any 2021 rollover balances in mind as you plan for your 2022 contributions, as funds will once again be use it or lose it on December 31, 2022 for unused funds greater than $570. This is an increase of $20 in the allowable carryover amount.
Healthcare FSA versus HSA
While both of these accounts can help lower your taxes and pay for medical, dental, vision and other qualified medical expenses, there are significant differences between the two and the IRS does not allow you to contribute to both a full medical FSA and an HSA at the same time.
If you moved from one of the PPO healthcare plans to the High Deductible Health Plan during our recent open enrollment period, you are eligible to open and contribute to an HSA account. If you had a medical FSA for 2021, it was converted to a limited purpose account on October 1, and funds in that account can only be used on dental and vision expenses after that date. Because FSA funds are fully available on January 1, you must continue to make your payroll deduction until you have contributed the full annual amount you elected.
Moving from the HDHP to one of the PPO plans is easier. Since you must be enrolled in a high deductible plan in order to contribute to an HSA, if you changed medical insurance on October 1, both employee and employer contributions to your HSA ended. However, any money in your HSA is still yours and you can continue to use those funds for any qualified medical expenses.
The FSA Open Enrollment period is from November 29 – December 8. This is a quick turn-around to allow time for Flores to receive enrollment data and generate debit cards prior to January 1, 2022. Please take a few minutes to complete the open enrollment process, even if you don’t wish to participate, so that we know that enrollment is complete.
As always, please reach out to any member of the People & Culture team if you have questions about the FSA or any of your benefits.
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