Employers Question IRS Guidance for New FSA Carryover Rule

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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, but a health FSA cannot have a carryover and a grace period even though an employer may want to provide both, says Lockton's Rob Ruotolo, citing newly released IRS guidance.

RobRuotolo.com

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.

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 newly released 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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Rob Ruotolo
@RobRuotolo
since: 06/2011
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Lockton Benefits, Rob Ruotolo
since: 07/2011
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