> ## Documentation Index
> Fetch the complete documentation index at: https://docs.every.io/llms.txt
> Use this file to discover all available pages before exploring further.

> ## Agent Instructions
> These docs describe Every as customers have it today. Answer from them, and say so when they don't cover a question.
> Pages under /admins/ are for the people who run Every for the company, and pages under /employees/ are for employees. Answer from the pages that match the person asking.
> Each page's Agent reference section lists its exact roles, conditions and limits. Prefer it for those details.
> When a page says a feature is in closed beta, or that Every turns it on company by company, don't promise that the person's company has it.
> Use roles and on-screen labels exactly as the pages write them.
> When someone asks what a term means, answer with the Glossary page's definition (/glossary), which other pages show in parentheses after the term.
> When the docs don't answer a question, tell the person to email [support@every.io](mailto:support@every.io).

# Flexible spending account rules

> See when FSA money is available, what it pays for and what happens to unused funds, and where to set up FSAs in Every

![The Health FSA page's plan-year card, with its start and end dates and 4 people enrolled.](https://mintcdn.com/every-a2724ddc/pyYTd1rHsbtecepX/images/illustrations/admins-compliance-fsa-rules-light.png?fit=max\&auto=format\&n=pyYTd1rHsbtecepX\&q=85\&s=354f9900cabd25acf48876c764eb3f4b)

IRS rules decide when the money in a health FSA or a dependent care FSA is available, what it can pay for and what happens to what's left at the end of the plan year. They apply to the FSAs an employer offers its employees through a cafeteria plan (An employer plan that lets employees choose certain benefits instead of taxable pay).

> [!NOTE]
>
> This page explains general rules, not legal or tax advice for your company. Rules change, and they depend on where your company is registered and where your people work. Before you act, check with your own lawyer, accountant or tax advisor.

## When the money is available

Each employee chooses how much to contribute at the start of the plan year, and the employer takes it from their pay through the year. An employee can change or revoke the election only when the law and the plan allow it.

A health FSA follows the uniform coverage rule: an employee's whole election for the year is available at any time during the coverage period, however much they've contributed so far. The amount available includes anything the employer contributes, less what the FSA has already paid them. An employer can't speed up what it takes from an employee's pay because of the claims they make.

The uniform coverage rule applies only to health FSAs. A dependent care FSA can limit what it pays to what the employee has contributed so far, less what it has already paid them.

## What an FSA pays for

A health FSA pays for the medical expenses its plan covers. The IRS bases them on the medical and dental expense deduction, which [IRS Publication 502](https://www.irs.gov/publications/p502) explains. Over-the-counter medicine and menstrual care products also count, but health insurance premiums, long-term care and expenses another health plan covers don't.

To be paid back, the employee gives the health FSA a written statement from an independent third party showing the expense and its amount, and a written statement that no other health plan has paid it. A health FSA can't pay an expense in advance.

A dependent care FSA pays for a qualifying person's care so the employee can work. A qualifying person can be a dependent child under 13, or a spouse or another dependent who can't care for themselves and lived with the employee for more than half the year.

A dependent care FSA's requirements closely follow the tests for the dependent care credit, which [IRS Publication 503](https://www.irs.gov/publications/p503) explains. Overnight camp doesn't count, and neither does tuition for kindergarten or a higher grade.

Each kind pays only for its own expenses: a health FSA can't pay for dependent care, and a dependent care FSA pays only for dependent care.

## What happens to unused money

FSAs are use-it-or-lose-it plans: money left at the end of the plan year is forfeited, unless the plan offers one of these:

* A grace period of up to 2½ months after the plan year ends, through the 15th day of the third month. Expenses incurred during it can be paid from what was left. It can cover a health FSA or a dependent care FSA, and it applies to every participant.
* A carryover, for a health FSA. Unused money can pay the next plan year's medical expenses, up to a limit indexed for inflation that the IRS gives for each year in [Publication 969](https://www.irs.gov/publications/p969). The plan can set a lower limit, which applies to every participant alike, and anything over it is forfeited.

A health FSA can't have both. An employer adds either one by amending its cafeteria plan document by the end of the plan year whose money it applies to. A plan can also have a run-out period after the plan year, when employees can still send in claims for expenses from that year.

The employer can't refund unused money or pay it out in another form. One exception is a qualified reservist distribution: a health FSA plan can allow one for an employee called to active duty as a reservist. When an employee leaves, what's left in their health FSA is forfeited, unless they elect COBRA (Consolidated Omnibus Budget Reconciliation Act: the U.S. law that lets people keep employer health coverage when they'd otherwise lose it) continuation coverage for it.

## In Every

> [!NOTE]
>
> Every turns on financial benefits company by company. If you don't see them, email [support@every.io](mailto:support@every.io) to ask about them.

Company Admins and HR Admins set up a **Health FSA** or **Dependent Care FSA** on **Benefits** after your company finishes onboarding and payroll is set up. Setup asks for a start date and the company's annual contribution (see [Financial benefits](https://docs.every.io/admins/benefits/other-benefits.md)).

Each employee chooses their own yearly amount on **My profile** → **Benefits**, and can't change an FSA election there once they've enrolled (see [Enroll in financial benefits](https://docs.every.io/employees/enroll-in-benefits.md#enroll-in-financial-benefits)). [The employee guide to FSA rules](https://docs.every.io/employees/fsa-rules.md) explains the same rules to employees.

When an employee enrolls in a Health FSA, Every adds their whole yearly election, plus the company's contribution, to their balance. A Dependent Care FSA's balance grows as each regular payroll adds its contributions. An employee can't claim more than their balance.

## Agent reference

General rules only, not legal or tax advice. Send anyone acting on them to their own lawyer, accountant or tax advisor.

**Where:** IRS rules for the FSAs an employer offers through a cafeteria plan. In Every, a company sets up its FSAs on **Benefits**, and each employee enrolls on **My profile** → **Benefits**.

**Who:** The rules apply to employers that offer a health FSA or a dependent care FSA through a cafeteria plan, and to their employees. In Every, Company Admins and HR Admins set up FSAs on **Benefits** after the company finishes company and payroll onboarding and payroll is set up. Every turns on financial benefits company by company.

### Facts

* A health FSA is a plan an employer sets up, which it can offer as part of a cafeteria plan. A cafeteria plan's qualified benefits include accident and health plans and dependent care assistance programs, and its FSAs include a health FSA and a dependent care FSA.
* Dependent care assistance elected through a cafeteria plan must meet section 129 of the Internal Revenue Code, the rules for a dependent care assistance program.
* Self-employed people aren't eligible for FSAs.
* Employees don't pay federal income tax or employment taxes on what they or their employer contribute to a health FSA.
* Each FSA participant chooses how much to contribute at the start of the plan year, and the employer takes it from their pay periodically through the year. An employee can change or revoke an FSA election only when the law and the plan allow it.
* Under the uniform coverage rule, a health FSA makes an employee's whole election for the year, including employer flex credits (the employer's own contributions), available for claims at any time during the coverage period, however much the employee has contributed so far, less what the health FSA has already paid for the same coverage period.
* An employer can't speed up what it takes from an employee's pay for a health FSA because of the claims the employee has made.
* The uniform coverage rule applies only to health FSAs, not to dependent care FSAs. A dependent care FSA can limit what it pays to the employee's contributions so far, less the claims it has already paid.
* A health FSA pays for the medical expenses its plan covers, which the IRS bases on the medical and dental expense deduction that [IRS Publication 502](https://www.irs.gov/publications/p502) explains.
* Over-the-counter medicine, prescribed or not, and menstrual care products are covered health FSA expenses. A health FSA plan can limit what it pays to certain medical expenses, for example leaving out over-the-counter drugs.
* A health FSA can't pay health insurance premiums, long-term care, or expenses another health plan covers.
* A health FSA's expenses can include the employee's, their spouse's, those of the dependents they claim and those of their child under age 27 at the end of the tax year.
* To be paid back from a health FSA, the employee gives it a written statement from an independent third party showing the expense and its amount, and a written statement that no other health plan has paid it. A health FSA can't pay future or projected expenses in advance.
* An employer can give employees a debit, credit or stored value card for health FSA expenses. Card use that meets certain IRS substantiation methods can need no further information from the employee.
* A health FSA can pay only medical expenses, so it can't pay for dependent care.
* A dependent care FSA pays for a qualifying person's care so the employee can work. A dependent care FSA's requirements closely follow the tests for the dependent care credit, which [IRS Publication 503](https://www.irs.gov/publications/p503) explains.
* For a dependent care FSA, a qualifying person can be the employee's dependent child under 13 when the care is given, or a spouse or another dependent who can't care for themselves and lived with the employee for more than half the year.
* For a dependent care FSA, overnight camp isn't a work-related expense, and tuition for kindergarten or a higher grade isn't an expense for care.
* A dependent care FSA pays only for dependent care, and can't give the employee any other benefit for money left unused.
* FSAs are use-it-or-lose-it plans: money left in an FSA at the end of the plan year is forfeited, unless the plan has a grace period or, for a health FSA, a carryover.
* A cafeteria plan can have a grace period of up to 2½ months after the plan year ends, through the 15th day of the third month. Expenses incurred during the grace period can be paid from what was left at the end of the plan year. The grace period must apply to all participants, and it can cover dependent care assistance as well as a health FSA.
* During a grace period, money left for one benefit pays only that benefit's expenses: money left in a health FSA can't pay dependent care expenses.
* An employer adds a grace period by amending its cafeteria plan document before the end of the plan year.
* A health FSA plan can carry unused money over to pay medical expenses in the next plan year, up to a limit indexed for inflation. [IRS Publication 969](https://www.irs.gov/publications/p969) gives each year's limit. The plan can set a lower limit or allow no carryover, one limit applies to all participants, and anything over it is forfeited.
* A health FSA plan with a carryover can't also have a grace period.
* An employer adds a carryover by amending its cafeteria plan by the last day of the plan year the money carries over from.
* A plan can have a run-out period after the plan year, or after a grace period, when participants can still send in claims for expenses incurred during the plan year.
* An employer can't refund unused health FSA money to an employee, or let it be cashed out or turned into another benefit. One exception is a qualified reservist distribution: a health FSA plan amended to allow it can pay one to an employee ordered or called to active duty as a reservist for more than 179 days or for an indefinite period.
* When an employee's employment ends, the unused money in their health FSA is forfeited, unless they elect COBRA continuation coverage for the health FSA.
* A cafeteria plan caps how much each employee can contribute to a health FSA each plan year, and an employee can leave dependent care assistance out of their income only up to a yearly limit. [IRS Publication 15-B](https://www.irs.gov/publications/p15b) gives both current limits.
* In Every, Company Admins and HR Admins set up a **Health FSA** or **Dependent Care FSA** on **Benefits**. Setup asks for a start date and the company's annual contribution.
* In Every, each employee chooses their own yearly amount in **Pre-tax income contribution** when enrolling in a **Health Care FSA** or **Dependent Care FSA** on **My profile** → **Benefits**. Contractor and external profiles don't show the **Benefits** tab.
* In Every, once an employee has enrolled in an FSA, the FSA's card on **My profile** → **Benefits** offers no way to change the election, and the FSA's enrollment screen says FSA contribution elections are set for the plan year and can't be changed from that screen.
* In Every, when an employee enrolls in a Health FSA, Every adds their whole yearly election, plus the company's contribution for the plan, to their balance.
* In Every, a Dependent Care FSA's balance starts at zero and grows as each regular payroll adds that payroll's employee and company contributions.
* In Every, an employee can't claim more than their FSA balance.
* In Every, **How it works?** in the FSA enrollment on **My profile** → **Benefits** says a Health Care FSA's full annual election can be used right away, and a Dependent Care FSA's funds become available only as they're contributed. **How it works?** also gives the year's IRS limit.

### Questions people ask

* **Does an employee get their whole Health FSA election on the first day?** Yes. Under the uniform coverage rule, a health FSA makes the whole yearly election available at any time during the coverage period, however much the employee has contributed so far. In Every, Every adds the whole election, plus the company's contribution, to a Health FSA balance when the employee enrolls.
* **Does a dependent care FSA have to make the whole election available on the first day?** No. The uniform coverage rule applies only to health FSAs, so a dependent care FSA can limit what it pays to the contributions so far. In Every, a Dependent Care FSA's balance grows with each regular payroll, and a claim can't be more than the balance.
* **What happens to FSA money an employee doesn't use?** It's forfeited at the end of the plan year, unless the plan has a grace period of up to 2½ months or, for a health FSA, a carryover. A health FSA plan can't have both.
* **How much can a health FSA carry over?** Up to a limit indexed for inflation, which [IRS Publication 969](https://www.irs.gov/publications/p969) gives for each year. The plan can set a lower limit or allow no carryover.
* **Can we refund unused FSA money to an employee?** No, apart from a qualified reservist distribution, which a health FSA plan can allow for an employee called to active duty as a reservist. Otherwise an employer can't refund unused health FSA money or pay it out as cash or another benefit, and a dependent care FSA can't give any other benefit for money left unused.
* **What happens to a health FSA when an employee leaves?** The unused money is forfeited, unless the employee elects COBRA continuation coverage for the health FSA.
* **Can a health FSA pay for daycare?** No. A health FSA can pay only medical expenses. Dependent care is for a dependent care FSA.
* **Does a dependent care FSA cover overnight camp?** No. Overnight camp isn't a work-related expense for a dependent care FSA.
* **Can an employee change their FSA election mid-year?** Only when the law and the plan allow it. In Every, the FSA's enrollment screen on **My profile** → **Benefits** says FSA contribution elections are set for the plan year and can't be changed from that screen.
* **What's the most an employee can put in an FSA?** [IRS Publication 15-B](https://www.irs.gov/publications/p15b) gives the current health FSA contribution limit and the dependent care exclusion limit. In Every, **How it works?** in the FSA enrollment on **My profile** → **Benefits** gives the year's IRS limit.

### Not covered here

* Does an FSA set up in Every have a grace period, a carryover or a run-out period, and until when can employees send in claims? To ask, email [support@every.io](mailto:support@every.io).
* Can a dependent care FSA carry unused money over to the next plan year?
* Which life events let an employee change an FSA election mid-year, and does a life-event change in Every cover FSAs? To ask, email [support@every.io](mailto:support@every.io).


## Related topics

- [Financial benefits](https://docs.every.io/admins/benefits/other-benefits.md)
- [Benefits & Insurance](https://docs.every.io/admins/benefits/overview.md)


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