New Rules for Flexible Spending Accounts Mean More Choices

Employers who provide Flexible Spending Accounts (FSA) under Section 125 Cafeteria Plans can now choose to modify their FSA plan to allow employees the ability to roll-over up to $500 in unused funds from year-to-year, thanks to new rules enacted by the U.S. Treasury Department.

To take advantage of this change, employers must amend their plans in writing, but an amendment may be made retroactively for the 2013 plan year. Some FSA plans include provisions for a grace period, where an employee can use prior year account balances to cover any expenses incurred in the first seventy-five days after the end of the year. If an employer chooses to amend their FSA plan to allow for the roll-over of funds, however, the plan must also be amended to remove any grace period.

Employees who choose to roll-over $500 in unused funds may still defer the full $2,500 allowed in the next plan year, but the employer may choose to apply the newly deferred funds from the current year before applying the rolled-over funds from the previous year.

To help employers and employees transition to health care plans newly available under the Affordable Care Act, the enacted rules also include provisions which allow employees who are part of non-calendar cafeteria plans to make retroactive decisions regarding their FSA plans.

If you have any questions about your FSA plans, or want to discuss any business issues, contact me at or 413-570-3170.