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Total Articles: 8

IRS Loosens the FSA "Use-It-or-Lose-It" Rule

For nearly three decades, individuals participating in health flexible spending account plans ("FSAs") have been subject to a "Use-It-or-Lose-It" rule. This rule generally states that individuals with unused FSA balances at the end of the plan year (or applicable 2.5-month grace period) must forfeit those amounts. On October 31, 2013, the Internal Revenue Service ("IRS") issued Notice 2013-71, which permits, but does not require, employers to amend their cafeteria plans to allow participants to "carry over" up to $500 of unused funds to the following plan year. Below is a summary of the main features of the new carryover rules:

Legal Alert: IRS Modifies "Use It or Lose It" Rule for Health Flexible Spending Arrangements

Summary: On October 31, 2013, the Internal Revenue Service (IRS) issued Notice 2013 -71 (the "Notice"), which made two significant changes affecting the administration of cafeteria plans under section 125 of the Internal Revenue Code. First, the Notice modifies the proposed regulations under section 125 to add a limited exception to the "use it or lose it" rule for health flexible spending arrangements ("FSAs"). Next, the Notice clarifies the "transition relief" that was provided in the preamble to those regulations allowing certain participants in non-calendar-year plans to make mid-year elections that are necessitated by the Affordable Care Act, even though there may not be a "change in status."

At Last, A Little Good FSA News

Ironically, one of the first things that employees probably heard about the health care reform law back in 2010 had a decidedly anti-reform sound to it: It would halve the legal limits on health flexible spending account (FSA) contributions to $2,500 in 2013.

Legal Alert: Final HIPAA Regulations Released: Time to Review Your HIPAA Policies?

Executive Summary: The U.S. Department of Health and Human Services ("HHS") recently released long-awaited final HIPAA Regulations. The new regulations finalize many changes previously proposed to the Privacy, Security, and Enforcement Rules, and modify the Breach Notification Rule initially adopted in August 2009. In addition, the new regulations extend HIPAA application to Business Associates.

FSA Rules Changing

Beginning in 2013, employee pre-tax contributions to a flexible spending account (FSA) will be limited to $2,500. In the past, companies could impose their own limits on these employee contributions. Here's what you need to know:

IRS Guidance Puts In Extended Date For FSA Limits, Relieves The Pressure On Plan Sponsors

Employers around the country are waking up to a serious and unexpected problem with their health care flexible spending accounts. The health reform law enacted several years ago quietly limited these popular "FSA" benefits to $2,500 per year, effective January 1, 2013. But the express terms of the law conflict with the explanation provided by Congress, and many employers have been scratching their heads trying to figure out when plans must be changed to meet the requirements of the new law, and what amendment language must say.

IRS Provides Much Needed Guidance for Health FSAs

Employers are getting some welcome relief in the form of IRS guidance that provides helpful details and clarity on how to implement the upcoming $2,500 limit on salary reduction contributions to health flexible spending accounts (FSAs) set by the Patient Protection and Affordable Care Act (PPACA).

HEART Act Guidance Clarifies Health FSA Distributions For Reservists.

Under new guidance issued by the Internal Revenue Service (IRS), employers will more easily be able to allow workers who have been called up to active military duty to take full advantage of “qualified reservist distributions” from their health flexible spending accounts (FSAs).
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