Good news from Washington, D.C.! Today the Department of Treasury issued a press release and informational fact sheet announcing a major policy change relating to Flexible Spending Accounts (FSAs) that has many positive implications for all FSA constituents - including employers and participants. The Department of Treasury has modified its FSA "use-it-or-lose-it" provision to allow a limited rollover of FSA funds.
Details are as follows:
Effective in plan year 2014, employers that offer FSA programs will have the option of allowing participants to roll over up to $500 of unused funds at the end of the plan year.
Effective immediately (in 2013), employers that offer FSA programs that do not include a grace period will have the option of allowing employees to roll over up to $500 of unused funds at the end of the current 2013 plan year.
For the past several years, BPC has been deeply involved in leading industry efforts to educate and convince Federal policymakers to adopt this major new feature for FSAs. BPC is thrilled that these efforts have borne fruit - and believe that this is fantastic news for all FSA stakeholders.
From our perspective, the major benefits of this new "rollover" provision include:
- Eliminating the most significant impediment to FSA adoption (use-it-or-lose-it) - creating significant upside for FSA adoption growth, which has been limited over the past several years
- Enhancing healthcare options and offering greater funds protection for FSA participants, particularly lower & middle income workers who are highly concerned about cash flow
- Minimizing risk for constituents with unpredictable healthcare expenses, such as those dealing with chronic conditions that may necessitate high-cost procedures/services with ambiguous timing or medical necessity
- Curbing wasteful & potentially unnecessary end-of- year spending by FSA participants seeking to avoid losing unused funds
Since this was issued today, we are combing through the guidance and more details will follow. You can read the guidance in full here.