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Wednesday, 30 October 2013 12:00

Amend Your FSA Plan Now to Include New FSA Rollover Option

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On October 31, the US Treasury released guidance indicating that employers may now offer the option of rolling over up to $500 of unused Flexible Spending Account dollars to a future plan year.  This is big news because it takes away one of the biggest fears employees have about using an FSA.  There’s really no reason now for an eligible employee to NOT enroll in the FSA for at least $500, now that it can roll over indefinitely.
Note that if an employee rolls over $500, he or she may still elect the entire amount allowed under your FSA plan for the following year (up to an IRS max of $2,500). If they don’t use it all, however, they can only roll over the same $500 next year.
Employers now have three choices when it comes to designing an FSA:
  1. Continue to enforce the “Use-it-or-Lose-it” Rule that means any unused dollars at the end of the plan year revert to the employer.
  2. Take advantage of a 2 ½ month grace period which allows your employees to have extra time to INCUR claims, not just submit receipts.  This allows UNLIMITED rollover in terms of dollar amounts, but a LIMIT in terms of time to use it. This grace period cannot be used in conjunction with the new $500 rollover.
  3. Jump on this newly available third option, of allowing a $500 rollover.  This works the opposite of option 2, giving the employee only a LIMITED dollar amount, but UNLIMITED time to use that $500.
You may amend your plan document right now for the plan year that is already in progress (IF you don’t already offer the 2 ½ month grace period), to allow employees to rollover up to $500 of the dollar amounts already elected.  Or, you can wait until the following plan year to put in place ANY of the three options above.
We recommend choosing the new option of the $500 rollover as the most employee-friendly option, to encourage the highest FSA participation possible. Give us a call or This email address is being protected from spambots. You need JavaScript enabled to view it. with any questions.
Read 7734 times Last modified on Monday, 14 September 2020 20:36
Amy De Lorenzo

Amy Johnston is an Account Manager with extensive experience working with both large and small employers as a broker.  In addition to five years of broker experience prior to joining Fall River, she also brings eight years of insurance carrier expertise.  Amy is an expert on ERISA, the Affordable Care Act, and other compliance issues.

Ms. Johnston received a Bachelor of Arts degree in Communications from Colorado State University. She is a Colorado native from Steamboat Springs, and loves spending time in the mountains with her husband, two children, and Tucker the cocker spaniel. She enjoys snowshoeing, hiking, and philanthropy work to promote education.