Employers with calendar year Flexible Spending Account Plans may wish to remind their employees to use up their account balances. FSA amounts that are not used during the plan year are must be forfeited, subject to certain exceptions.
Recently, the IRS modified the health FSA rules so that plans could allow participants to carry over up to $500 of unused contributions into the next plan year. This change to the “use-it-or-lose-it” rule could be implemented only if the FSA did not have a grace period. Plans that have a grace period can allow participants to use any amount of unused contributions but only for 2-1/2 months after the end of the plan year.
Either way, employers with calendar year plans should encourage the spend-down of FSA funds.
For information about BAS’ Flexible Spending Account administration services, contact solutions@BASusa.com.
