No, you cannot use your 2024 Flexible Spending Account (FSA) funds to pay for expenses incurred in 2023.
FSA dollars are specifically tied to the plan year in which the expenses are incurred. This means that a current plan year's FSA funds cannot be used to pay for claims that took place in a prior plan year. Each FSA operates on a specific plan year, and expenses must be incurred within that year to be eligible for reimbursement from that year's funds.
Understanding FSA Plan Years
A Flexible Spending Account operates on an annual cycle, known as the "plan year." This plan year typically aligns with your employer's benefit year, which might be a calendar year (January 1 to December 31) or a different 12-month period.
Key aspects of an FSA plan year include:
- Period of Coverage: Expenses must be incurred within this specific 12-month period.
- Funds Expiration: Funds are generally "use-it-or-lose-it," meaning any money not used by the end of the plan year (or grace period) is forfeited.
- New Allocations Annually: You elect a new contribution amount for your FSA each new plan year.
The "Incurred Date" Rule
The crucial factor for FSA reimbursement is the date the service was rendered or the item was purchased, not the date you pay the bill. For instance, if you had a dental procedure in December 2023, that expense is tied to your 2023 FSA, even if you don't receive or pay the bill until January 2024. Your 2024 FSA funds would only be applicable to expenses incurred on or after January 1, 2024 (assuming a calendar plan year).
Grace Periods and Run-Out Periods
While 2024 funds can't pay 2023 expenses, there are specific provisions that might allow you to pay late 2023 expenses with your 2023 FSA funds even after the plan year ends. These are:
- Grace Period: Some FSA plans offer a grace period, typically up to 2.5 months after the plan year ends. During this time, you can incur new expenses and use remaining funds from the prior plan year to pay for them. However, this still doesn't allow 2024 funds to cover 2023 expenses. It merely extends the period for using 2023 funds.
- Example: A grace period from January 1, 2024, to March 15, 2024, for a calendar year 2023 FSA means you can use your remaining 2023 FSA funds to pay for eligible expenses incurred during this grace period.
- Run-Out Period: Almost all FSA plans have a "run-out" period. This is the timeframe after the plan year (and any grace period) during which you can submit claims for expenses incurred during the prior plan year. This period is solely for submitting documentation, not for incurring new expenses. It ensures you have time to get reimbursed for valid expenses from the previous year's funds.
- Example: If your 2023 plan year ended December 31, 2023, and your plan has a run-out period until March 31, 2024, you can submit claims for expenses incurred between January 1, 2023, and December 31, 2023, up until March 31, 2024.
It's crucial to understand that neither a grace period nor a run-out period allows you to use money from your new 2024 FSA allocation for old 2023 expenses. Both simply relate to the timeframe for spending or claiming funds from the 2023 FSA.
Scenario Breakdown
| Expense Incurred Date | Eligible FSA Plan Year |
|---|---|
| January 1, 2023 | 2023 FSA |
| December 31, 2023 | 2023 FSA |
| January 1, 2024 | 2024 FSA |
| March 1, 2024 | 2024 FSA (or 2023 FSA if incurred during a 2023 grace period) |
Practical Advice
- Review Plan Details: Always check your specific FSA plan's documents for details on your plan year, grace periods, run-out periods, and rollover options. This information is typically available through your employer's HR department or your FSA administrator's website.
- Submit Claims Promptly: To avoid losing funds, submit your eligible FSA claims as soon as possible after incurring the expense, and certainly within the run-out period for the relevant plan year.
- Track Expenses: Keep detailed records and receipts for all eligible expenses throughout the year.
For more information on FSA rules and eligible expenses, you can consult resources from the IRS or Healthcare.gov.
