Q.- Many of our employees are not going to use their full FSA balances. Can we refund the money to them if we withhold taxes?
A.- No. A condition of an employer setting up a flexible spending account plan is that amounts that are not used must be forfeited. Unused contributions cannot be refunded to a participant even if taxes are withheld. If amounts are not used within the plan year and affiliated grace period, they must be forfeited (subject to a plan¹s carryover provisions).
