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Change from the IRS concerning Flexible Spefrom the IRS concerning Flexible Spending Accounts

Flexible Spending Accounts


The Department of Treasury announced a major policy change relating to Flexible Spending Accounts (FSA) that has many positive implications for all FSA constituents, including administrators, employers, and participants.

The Department of Treasury has modified Flexible Spending Accounts (FSA) "use-it-or-lose-it" provision to allow a limited rollover of FSA funds.

  • Effective 2014 (plan year), 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, 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.

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

Important New Affordable Care Act (ACA) Regulations that may Affect your eFlex Plan


Premium Reimbursement Account (PRA)

  • Effective for plan years beginning on or after January 1, 2014, tax-free dollars for individual health policies are to be discontinued under PRAs. You may, however, choose to continue offering a PRA to employees using post-tax contributions. Read more...

Health Reimbursement Arrangement (HRA)

For more details see

Revenue Procedure 2013-35
Dictates employee contribution limit of $2,500 will remain unchanged for 2014 plan years.

Notice 2013-71
Introduces major changes to the current "use-or-lose" rule, which results in the forfeiture of any unused funds at the end of each health FSA plan year.
Under the new rule, employers may allow participating employees to carry over unused funds up to $500 to the next plan year, assuming the employer's plan does not include the grace period extension.

Send questions to: DRAbenefits@insdra.com

Employee Benefits Dept.

T: 510.465.3090
License# 0020739



For more information on San Francisco employee benefits, give Dealey, Renton & Associates a call at 510-465-3090.
Posted 1:31 PM

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