BREAKING NEWS! IRS Allows Rollover of Health FSA Funds! Eliminating the “Use it or Lose it” Rule!

October 31, 2013

The IRS released Notice 2013-71 today that offers the option for participants to rollover up to $500 at end of plan year instead of a 2.5-month grace period in which to spend down their FSAs.  The notice provides that money carried over can be used for the old or new plan year.

Employers make the choice to either offer the 2.5-month extension OR the $500 rollover option. And, you can amend your 2013 (current plan) to allow the rollover option before December 31, 2013. If you don’t have a calendar year plan, you may amend your existing plan any time prior to the end date.

What you Need to Know:

  • Applies to 2013 plan years and of course the 2014 plans.
  • Applies only to health FSAs; Daycare FSAs still have the use it or lose it rule.
  • Groups with existing FSAs that want to replace the 2.5-month extension with this new rollover option need to amend the plan. Contact eflex sales for an amendment (efgsales@eflexgroup.com).
  • Does not affect the $2,500 maximum contribution currently in place. In other words, the employee could contribute $2,500 in 2014, carryover $500 from 2013, giving them $3,000 for the 2014 plan year.
  • The $500 rollover may be used for expenses incurred in the new plan year (e.g., 2014) as well expenses from the previous plan year. The notice creates more flexibility and more time for participants to spend their flex dollars. They’re no longer limited to just 2.5 months.
  • Employer is not required to offer the carryover or the 2.5-month extension.

We do expect some minor development time during the next few months to modify our system to accommodate the new rollover option. So, if you choose to amend your 2013 plan, the carryover amounts may not show up in the system right away. Please tell your employees to be patient as we should be up and running quickly. We will let you know as soon as the carryover is live in our system.

 

Contact your eflex Sales Associate right away if you wish to amend your plan for the carryover. You may also call 877-933-3539, ext. 300 or email efgsales@eflexgroup.com.

Watch your email for details on our upcoming compliance seminar in which we’ll discuss all of the recent changes and what they mean to your eflex plans and services.

In the wise words of Bob Dylan, “the times, they are a changing.” At eflex, we’re right there with you.

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Successor Agency - RACSJ