Treasury, IRS Modify FSA Use-it-or-Lose-it Rule - Client Alert from The McCart Group

Client Alert

from

The McCart
Group

November 1, 2013

Treasury and IRS Modify FSA Use-it-or-Lose-it Rule

The U.S. Department of the Treasury and the Internal Revenue Service (IRS) have decided to permit employers to allow plan participants to carry over up to $500 of their unused health FSA balances without worrying about the infamous "use-it-or-lose-it" rule. The change takes effect immediately.

Last year, the U.S. Department of the Treasury and the IRS placed a $2,500 limit on pretax employee contributions to health care flexible spending accounts (FSAs) under the Patient Protection and Affordable Care Act (PPACA), effective in 2013.

Now, officials have determined that a $500 rollover cap is appropriate because most FSA forfeitures are for less than $500.

However, an employer cannot offer both an FSA carryover provision and an FSA grace period. To adopt the change, an employer must add a carryover provision to the FSA plan document and eliminate any grace period provision, officials said.

Read the Treasury press release.

The McCart Group will continue to update you on the regulations as they are released.

	Please contact your* McCart Group representative with any questions you may have.*

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