FSA Reminder Email Template: HR Communication

Flexible spending accounts (FSAs), are funds which allow employees to store money tax-free for the purposes of medical or healthcare expenses. Unlike health savings accounts (HSAs), FSA funds typically do not rollover from year to year. Here we have created an HR template that will help you to remind employees to utilize remaining funds before the date of expiration. This template will remind them to submit any receipts as well. 

What is a Flexible Spending Account (FSA)?

A flexible spending account, which is also referred to as a flexible spending arrangement, is an account that allows employees to set aside pre-tax dollars for the sake of healthcare or medical expenses, as well as dependent care expenses. Employees may place as much money as they desire into their FSA account so long as it does not exceed the maximum amount allotted each year. 

While FSA’s are quite similar to HSAs they differ in 3 very important ways:

1. While HSA funds roll over from year to year, FSA funds typically do not. FSA funds will expire at the end of the year. For this reason it is crucial to remind employees of the coming expiration on available funds. FSA funds will typically expire at the end of the calendar year or in some instances the end of the plan year. Depending on the plan there could be a carryover or grace period. 
2. The Consolidated Appropriations Act—signed into law in 2020—allows employers who are sponsoring an FSA or dependent care benefit to grant employees the ability to roll over any unused amounts in their accounts. While this Act permits companies to amend their policies by providing a roll over option, it does not require it. The Act is authorized for the 2020 year into 2021, as well as 2021 into 2022. There is currently no legislation extending this notion beyond that timeframe. 
3. Employers may contribute to both HSAs and FSAs, however there is a limit to how much they can contribute to an FSA based upon what the employee contributes. The employer may contribute up to $500 regardless of what an employee contributes. However, beginning at $501 the employer may only make a dollar for dollar match on what the employee contributes.  
4. To enroll in an HSA plan you must be a member of a high deductible health plan, whereas with an FSA you do not.

2022 FSA Contribution Limits

The IRS has announced that the maximum contribution amounts for FSAs will increase from $2,750 to $2,850 for the 2022 year. The maximum carryover amount has also been increased for 2022, from $550 to $570. Contribution limits for DCFSAs, however, will not be subject to inflation.

Template: Submit FSA Information Update Communication

Use the following template to remind employees to make the most of their FSA funds before the end of the year: 

Team,

As a reminder, if any individuals have chosen to utilize [company]’s FSA benefit, then you will need to spend the remaining balance before the end of the year so as to avoid the expiration of the tax advantaged funds. 

Employees who wish to utilize their funds before they expire may review the plan documents [link] to determine which services and products may be eligible for purchase with FSA dollars. It is also recommended that you take time to review FSAstore.com for further ideas on how you might make the most of your funds.

Additionally, the IRS announced no changes to FSA contribution caps in 2022. *As a note, for the end of the 2021 year leading into the 2022 year, [organization] has/has not decided to honor the Consolidated Appropriations Act, by allowing full rollover of funds within participating FSAs.

Please review the following amounts when planning for the upcoming year:

Contribution Max – $2,850

Dependent Care FSA Max (for individuals or married couples filing jointly) – $5,000

Dependent Care FSA Max (for married persons filing separately) – $2,500

Should you decide to update the contribution amount for 2022, please contact [contact information] or make any and all adjustments to your elections using [name of HRIS].

Should you have any further questions regarding FSAs or any other benefits, please contact [contact information].

Thank you,

[name]