Should You Change Your Flexible Spending Account Election Due to COVID-19?

Each year, many workers take advantage of the opportunity to allocate money to a health or dependent care flexible spending account, or FSA. With the health version, you set aside funds on a pre-tax basis to pay for expenses like prescription medications, doctor visits, orthodontics, and eyeglasses. With the dependent-care version, you set aside funds on a pre-tax basis to pay for child care. That includes day care centers, after-school care, and summer camp.

The problem with FSAs is that despite the name, they're actually somewhat inflexible -- you're required to commit to an annual contribution for your plan during your employer's benefits-enrollment period and you must either use up that entire balance during your plan year or otherwise risk forfeiting some of it. (In some cases, however, you can carry a portion of your unused balance into the following plan year and use it early on.) Similarly, if you underfund your FSA and then realize during your plan year that your expenses are higher than anticipated, you can't increase your pre-tax contribution to that plan.

That is, until now.