Yesterday, the Department of Treasury announced a major policy change that will impact Flexible Spending Account (FSA) plans. In what is being hailed as a hugely positive development for administrators, employers, and FSA participants, the Treasury has modified the “use it or lose it” provision to allow for a limited rollover of FSA funds.
Details are as follows:
- Effective for the 2014 plan year, employers will have the option to allow FSA plan participants to roll over up to $500 of unused funds at the end of the plan year.
- Effective immediately, employers with an FSA plan that does not include a grace period will have the option to allow current FSA plan participants to roll over up to $500 of unused funds at the end of the 2013 plan year.
The new guidance, as issued by the IRS, can be found here.
This announcement obviously comes as very welcome news to employers, brokers and other FSA administrators who have long been involved in industry efforts to convince policymakers to modify or eliminate use it or lose it, which is widely perceived as one of the most significant barriers to participation in FSA plans. We are thrilled that with this decision, an even greater number of Americans will be able to more easily save money on healthcare expenses by participating in an FSA.