You can provide flexible spending account (FSA) participants with some breathing room regarding their FSA claims by offering a run-out period. Learn more about run-outs in the third and final blog post of our FSA flexibility series.
What is a run-out?
A run-out is an extension past the last day of the plan year to give FSA participants more time to file for reimbursement of claims incurred during the plan year.
How long can a run-out period be?
You are allowed, but not required, to permit FSA participants to submit receipts for reimbursement for up to a certain number of days after a plan year’s end. Most FSAs include run-out periods as a standard feature, but the duration varies – a common length is 90 days, or by March 31.
Who determines the length of the run-out?
The employer determines how long an FSA’s run-out is.
Run-out versus grace period
How does a run-out differ from a grace period? Run-outs simply give participants more time to file claims and request reimbursement. On the other hand, a grace period extends the plan year end date for up to 2 ½ months to give participants additional time to incur expenses.
Perks for participants
A run-out does give FSA participants more time at the end of the plan year to submit their claims. That added time can be helpful considering the time of year a plan year end date often occurs. For example, most plan years run from January 1 to December 31. For your participants with a run-out, they will have additional time after the holiday season to file claims and request reimbursements so that they spend down their FSA funds, which will contribute to providing them a positive experience.
Check out our first blog post in the series to learn about FSA carryovers or our second blog post to learn about FSA grace periods.
The information in this blog post is for educational purposes only. It is not legal or tax advice. For legal or tax advice, you should consult your own counsel.