« Changing Healthcare Costs Will Be Major HR Issue in 2014 | Main | NACE Report Reveals Growth in Education Industry, Drop in Salaries »

FSA "Use-It-Or-Lose-It" Rules Modified

| No comments

Did you know that last October the U.S. Department of the Treasury (DOT) made modifications to rules governing Flexible Spending Accounts, commonly known as FSAs, and their "use-it-or-lose-it" clause? To make FSAs more "consumer-friendly" and provide "added flexibility," employers may now allow plan participants to carry over up to $500 of their unused FSA balances remaining at the end of a plan year, according to a press release from the Department.

Many organizations offer FSAs in addition to employee health insurance coverage as a way for employees to 'save' or contribute funds to be used for qualifying medical expenses (such as prescriptions, insulin, contacts, co-pays, medical stays/visits and resulting bills, etc.). These contributions are excluded from gross income, meaning that the funds can be used without federal or employment taxes being deducted.

In announcing the change to FSA rules, U.S. DOT Secretary Jacob J. Lew explained, "Across the administration, we are always looking for ways to provide added flexibility and commonsense solutions to how people pay for their healthcare. Today's announcement is a step forward for hardworking Americans who wisely plan for health care expenses for the coming year."

The DOTs rule change keeps in place an existing option for FSA plan sponsors to allow employees a grace period after the end of the plan year. However, a FSA cannot have both a carryover and a grace period. It can only have one or the other or neither.  

What does this mean for an individual with an FSA?

SHRM noted in a recent article "FSA Use-it-or-Lose-it Rule Modified" that some 14 million employees nationally participate in FSAs, making this seemingly small change quite large when it comes to spending, healthcare, patient wellbeing, taxes, and HR's management of benefits. The hope is that by loosening the "use-it-or-lose-it" rule, more people will participate in FSAs and utilize the funds they have allocated rather than losing them at the end of the year.

For more information, contact your HR department and/or review this IRS Fact Sheet.

 

Have a question, or know of a school or district pursuing an innovative human capital project? Share your comments below or tweet me @EmilyDouglasHC! I am always looking to make information in this blog relevant as well as feature talent managers doing great things!

You must be logged in to leave a comment. Login |  Register
Ground Rules for Posting
We encourage lively debate, but please be respectful of others. Profanity and personal attacks are prohibited. By commenting, you are agreeing to abide by our user agreement.
All comments are public.

The opinions expressed in K-12 Talent Manager are strictly those of the author(s) and do not reflect the opinions or endorsement of Editorial Projects in Education, or any of its publications.

Follow This Blog

Advertisement

Categories

Archives

Recent Comments