Flexible spending accounts can now allow carryover of up to $500 to following year

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11/06/2013 by Human resource services
Flexible spending accounts can now allow carryover of up to $500 to following year

At a glance

IRS has amended its rules for healthcare flexible spending accounts to permit carry over up to $500 per plan year rather than forfeit all unused funds

The IRS has amended its rules for healthcare flexible spending accounts (FSAs) to permit participants to carry over up to $500 per plan year rather than forfeit all unused funds under the traditional ‘use or lose’ rules. FSAs are currently allowed to permit participants to apply unused funds at the end of the plan year to expenses incurred during a 2 ½ month grace period following the end of the plan year. IRS Notice 2013-71 provides that employers can offer either the carryover or the grace period alternative, but not both. Employers are not required to offer either alternative.