IRS: Modification of “Use-It-or-Lose-It” Rule For Flexible Spending Arrangements (FSAs)

On October 31, 2013, the Department of Treasury issued notice Notice 2013 -71 along with a press release announcing a significant policy change affecting Flexible Spending Accounts (FSAs).  This policy modification contains a number of positive changes for FSA participants. The Department of Treasury has modified its FSA “use-it-or-lose-it” provision to allow a limited rollover of FSA funds.

What is changing?

  • Effective for plan years starting in 2014, employers will now have the option of allowing participants to roll over up to $500 of unused funds at the end of the plan year.
  • Effective immediately, employers that offer FSA programs that do not include a 2.5 month extension (grace period) will have the option of allowing participants to roll over up to $500 of unused funds at the end of the current 2013 plan year.

How will this benefit my participants?

  • This modification will help encourage FSA participation and significantly improve the overall experience of employees who already participate.
  • By enhancing healthcare options and offering greater protection of participant's annual elections.
  • This will also help to curb unnecessary spending by FSA participants seeking to avoid losing unused funds.

HRC Total Solutions will be providing additional information and educational materials for our broker partners, clients, and participants in the coming weeks.

 


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