The FSA Grace Period:
The FSA Grace Period is an extended period of coverage at the end of every plan year that allows you extra time to incur expenses to use your remaining Flexible Spending Account balance after the close of the plan year. The Grace Period is 2 ½ months (through March 15th of the following year).
What this means for you is that you have until March 15 of the next plan year to incur claims against your previous year's FSA funds. The State of Oregon adopted this amendment to reduce the chance that a participant in the FSA program will forfeit any funds. An easy way to think about this program modification is that every 12 month plan year is actually 14 1/2 months.
Only those who have FSA coverage through December 31 of the previous plan year can continue to incur claims in the grace period.
All FSA claims for services provided during the grace period will automatically be processed against the previous year's plan year first if filed by the claims filing deadline for that plan year, unless you request otherwise. If your claim exceeds the available funds from the previous plan year, any excess will be automatically applied to the new plan year.
Example 1: Kristen has $50 remaining in her medical FSA at the end of the plan year and has no more expenses to submit with dates of service during the actual plan year. Two weeks after the end of the plan year, Kristen goes to her dentist and incurs a charge of $145. She submits a claim to ASI. ASI’s reimbursement software processes the claim and $50 is applied to the remaining balance from the previous plan year, and $95 is applied to the new plan year’s balance.
Example 2: Kristen submits the claim for her $145 in dental expenses, but, knowing that she has a charge from the hospital for services provided during the past year, but has not received the billing statement yet, Kristen wants the entire $145 to be applied to the current year. Kristen includes a note with the claim packet asking to apply the entire dollar amount to the new plan year. ASI’s claim processor applies the entire reimbursement request to the new new plan year.
You participate in a healthcare FSA in 2017. In February 2017 you sign an agreement with an orthodontist to fit braces onto your daughter’s teeth in March 2017, and are scheduled to be removed in 18 months. For these services, the orthodontist will charge $1800. If you pay for the services on the first visit, you are permitted to be reimbursed the full $1800 as a 2017 expense, or up to your remaining balance for your 2017 election.