We are pleased to announce that on October 31st, 2013 the U.S. Treasury and the IRS announced new guidance to the long standing “Use-it-or-Lose-It” Rule regarding Flexible Spending Accounts (FSA). This new guidance has helped create a more favorable FSA option for employers and will potentially increase employee participation in those accounts.
The new guidance indicated that employers that offer FSA programs will have the option of allowing participants to carryover up to $500 of unused funds at the end of the plan year.
Employers can elect to adopt the carryover option by completing a plan amendment and submitting it to BeneFLEX prior to the end of your current plan year. Note: Plan designs cannot have both a carryover and a grace period. Therefore, if you currently offer a grace period you must amendment your documents to remove the grace period and replace it with the carryover option.
This is a win-win situation for employers and employees. Prior to this new guidance any leftover balance in an FSA was forfeited at the end of the plan year.
What this means for the Employers:
You now have the flexibility of designing your FSA plan to better fit your company’s needs. When designing your upcoming plan, you can include one of the following options: $500 carryover, grace period, or neither.
Recent surveys show that up to 80% of participants that did not participate in an FSA were worried about the risk of losing unused funds. Thanks to the recent modifications to the “Use-or-Lose” rule the carryover option is a win-win for all. With less risk, we anticipate increased participation, a more positive experience for contributors, and increased payroll tax savings.
As more participants enroll in your FSA program, you and your employees are poised for greater payroll tax savings.
Employees now have more control over their money and their healthcare spending, creating a happier & healthier workplace.
What this means for the Employees:
The $500 carryover option will give you peace of mind knowing that you can safely set aside pre-tax dollars for unexpected medical emergencies and use it when you need it most.
The new carryover option makes saving money easier. Now, employees can more easily participate in an FSA program without the fear of losing all of their unused funds (up to $500) at the end of the plan year. If you have never had an FSA, you can now experience the benefits of this great pre-tax benefit without the risk of losing your hard earned money.
Stop worrying about how to precisely predict your out-of-pocket medical spending for the upcoming plan year. Now with the new carryover option, you can rest assured that your hard earned money (up to $500) will stay in your account and be there when you need it. Plus, by using pre-tax dollars, you will save an average of 30% when you pay for doctor visits, prescription drugs, contact lens, lab work, and more when you use your pre-tax FSA dollars.
With the new carryover option, employees can make better elections. For example, if you would normally elect $500 to pay for a set of yearly eye glasses, you can now safely choose to make a $1,000 election. This additional election amount will prepare you for any unplanned medical expenses and now with the carryover option, you are not at risk for losing your unused funds (up to $500).