IRS Allows Taxpayers To Carry Over $500 In Unused Health FSA Contributions
The IRS recently issued guidance permitting employers to amend their plans and allow employees who participate in a health Flexible Spending Account Plan (“FSA”) to carryover up to $500 of any unused funds from the current year to the next. (Notice 2013-71.)
This guidance modifies the IRS’ “use it or lose it” rule which basically required employees to forfeit any amounts remaining unused at the end of the year. The carryover amounts may be used to pay or reimburse medical expenses incurred during the entire Plan Year to which it is carried over, and will not impact the employee maximum contribution of $2500.
In order to implement the “carryover” option, an appropriate plan amendment must be adopted on or before the last day of the plan year for which amounts are to be carried over.
Please contact your Trust Fund counsel for more information on this subject.
By Patricia Davis | February 10, 2014