We heard rumors the IRS would modify or eliminate it’s Section 125 forfeiture requirement, also known as the “IRS use it or lose it” rule, in Flexible Spending Account (FSA) plans. Well, the news is out:
October 31, 2013, the Treasury Department issued Notice 2013-71, providing employers more flexibility with medical reimbursement accounts. Effective with 2014 plans years, plans that do not offer a grace period, may allow up to $500.00 to roll-over. Currently, left over balances are forfeited to the plan (which often falls under the indirect control of the employer).
The key elements in this IRS Use It Or Lose It notice are 1) the $500 carryover is an alternative to the existing grace period rule, and 2) the plan must be amended in a timely manner. Talk to your Section 125 administrator or employee benefits broker or attorney, for more details. For a copy of this notice, click here.
For a big picture look at the effect of the Affordable Care Act in California, read our related story.
For additional employer requirements under the Affordable Care Act legislation click here. For rate comparisons of new group health plans, click here. For non-group e.g. individual family plans click this link.
Got questions? Request free consumer assistance from Certified Insurance Agents, below: