Is Your Flexible Spending Arrangement (FSA) Expiring on December 31st?
Here is the new rule from the IRS:
On October 31, 2013, the Internal Revenue Service ("IRS") announced a modification to the "use-it-or-lose-it" rule that applies to health care Flexible Spending Arrangements ("FSAs") under a cafeteria plan. Under the use-it-or-lose-it rule, unused amounts in a participant's health care FSA for a plan year not used to pay eligible medical expenses incurred during the plan year were required to be forfeited to the employer, unless the employer adopted the 2 1/2 month grace period. The grace period rules permit participants to use amounts remaining from the prior year to pay eligible medical expenses incurred during the first two months and 15 days immediately following the end of the plan year (March 15 for a calendar year plan).
For example, Jane Smith participates in her employer's FSA with a calendar plan year, a run-out period from January 1 to March 31, an open enrollment in November for making salary reductions for the following year and the $500 carryover.In November 2014, Jane elects a salary reduction of $2,500 for 2015. By December 31, 2014, she has $800 remaining from 2014. The plan may treat $500 of the unused $800 as available to pay 2015 expenses. Jane now has a total of $3,000 to spend in 2015. She is reimbursed for a $2,700 claim incurred in July 2015. The plan treats the first $2,500 as reimbursed with 2015 contributions, and the remaining $200 of the claim as reimbursed with unused 2014 contributions (leaving $300 for any further 2015 expenses). If she submits no further claims in 2015, the remaining $300 is carried over to 2016.

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IRS Announces Modification To "Use-It-Or-Lose-It" Rule For FSAs