Employers Face Surprising Trade-offs of New FSA Carryover Rule

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The IRS has ruled that up to $500 of a participant's unused health FSA balance may carryover for reimbursement of healthcare expenses incurred at anytime during the next plan year. But employers face complex trade offs because they may not offer both a grace period and a carryover.



The new FSA carryover rule presents complex trade-offs for employers.

A health FSA may provide for up to $500 of a participant’s unused balance to carry over and be used to reimburse healthcare expenses incurred at any time during that next plan year, according to new IRS guidance.

But a health FSA cannot have a carryover and a grace period, even though an employer may want to provide both. Employers are facing some complex trade-offs because of this rule, and will need to determine whether a grace period, a carryover, or neither is best for the organization. Employers who have or who are implementing health savings account-based plans will have particularly complex trade-offs to consider.

Learn all you need to know—Click Here to Download a Free FSA Rule Change White Paper for Employers from Lockton Companies, the world's largest, privately owned, independent insurance broker. You'll also receive a complimentary subscription to Human Capital Catalyst, a trusted decision-making resource for HR executives.

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Robert Ruotolo
since: 06/2011
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Lockton Benefits, Rob Ruotolo
since: 07/2011
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