A big change to the rules governing health flexible spending accounts (FSAs) was recently announced by the Internal Revenue Service (IRS).
On Oct. 31, the IRS released Notice 2013-71, which relaxes the “use-or-lose” rule for health FSAs. Previously, any money put into a health FSA could not be carried over into the next year, although reimbursements were allowed to be paid for qualified expenses incurred in a “grace period” of up to two and a half months after the end of the plan year.
Under the relaxed rule, employers will now be able to allow participants to carry over up to $500 in unused funds into the next year. Any unused FSA amount above $500 will be forfeited. This modification applies only if the plan does not also incorporate the grace period rule. Read full story pdf
