Under Internal Code (Code) section 125, a health flexible spending account (FSA) is an employer-sponsored account that employees can use to pay for or reimburse their qualifying medical expenses on a tax-free basis, up to the amount contributed for the plan year. Health FSAs are subject to a “use-or-lose” rule stating that any unused funds at the end of the plan year (plus any applicable grace period) will be forfeited.
On October 31, 2013 the Internal Revenue Service (IRS) released Notice 2013-71 which relaxes the “use-or-loose” rule for health FSAs. Under the relaxed rule, employers will now be allowed to allow participants to carry over up to $500 in unused funds into the next year.
Does this change affect your employees or you personally? Contact us today to get more information. 419-522-9892