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.