WASHINGTON (11/2/13)--Health flexible spending arrangement (FSA) plan participants will soon be able to carry over up to $500 of their unused health FSA balances from year to year, the U.S. Department of the Treasury and the Internal Revenue Service said this week.
The decision follows comments from individuals, employers and others who requested that the use-or-lose rule for health FSAs be modified, the Treasury said in a release. Currently, FSA plan holders are forced to forfeit any unused funds at the end of the year. Some employers Treasury permit grace periods of up to two-and-a-half months.
In requesting the policy change, commenters noted it can be difficult to predict future medical spending needs. They also said the change would make FSA plans more accessible for employees of all income levels.
"Across the administration, we are always looking for ways to provide added flexibility and common-sense solutions to how people pay for their healthcare," Treasury Secretary Jacob Lew said.
The new carryover conditions could be made available to employees as soon as this year. However, employers will need to decide whether they want to offer a grace period or a carryover to their employees. They will not be permitted to do both.
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