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IRS Allows Health FSAs To Carry Over Funds

11/01/13

  12:46:40 pm, by MedBen5   , 204 words,  
Categories: News, Health Plan Management

IRS Allows Health FSAs To Carry Over Funds

Great news for individuals with a health flexible spending account: The “use-it-or-lose-it” rule is being scrapped. On October 31, the IRS announced that, effective immediately, up to $500 of unused funds in a health FSA can be carried over to the following year at the discretion of the employer.

Prior to the rule change, any funds left unused at the end of the year would be forfeited, unless the employer offered a grace period. Now the employer has the option of allowing the carryover or the grace period, but not both.

According to The Wall Street Journal, the Obama administration made the change because the $2,500 employee contribution limit imposed on health FSAs under the Affordable Care Act essentially eliminated the reason behind the earlier rule – that people would use the pretax accounts to shelter large amounts of money.

The carryover rule does not affect the $2,500 contribution limit.

Employees who contribute to a health FSA can use the funds to pay for deductibles, copays, prescriptions and a variety of other medical expenses. A complete list is of eligible expenses is available at MedBen.com.

MedBen clients with questions regarding this change are welcome to contact Director of Administrative Services Sharon A. Mills at smills@medben.com.

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