In November 2013 the IRS announced new rules for up to $500 of unused amounts in a health Flexible Spending Account (FSA) that is part of a cafeteria plan.
The old rule was that if you didn’t have medical expenses during a plan year that totally used up your FSA, you were permitted a “grace period” of two months and 15 days in which to use up the previously unused portion.
Starting in 2013, health FSAs were limited to $2,500 per year, so the IRS decided to allow employers to amend their plan to allow up to $500 to carry forward into the next plan year. The only catch is that in order to allow the carry-over, the plan must not also allow the grace period.
If a plan has provided for a grace period and is being amended to add a carryover provision, the plan must also be amended to eliminate the grace period provision by no later than the end of the plan year from which amounts may be carried over. The ability to eliminate a grace period provision previously adopted for the plan year in which the amendment is adopted may be subject to non-code legal constraints.
We would be happy to assist you or your employer with any changes to your cafeteria plan.
Cunningham Dalman, PC publishes this web site and its component parts to inform users about our firm, our attorneys and general new developments in the law. The web site and blogs are not intended as legal advice on any matter. There are many factors that may affect your situation. You should not act or refrain from acting because of information found here without first seeking appropriate legal or other professional advice from someone who is familiar with your particular circumstances.
In the operation of this web site and our blogs, we do not intend to create an attorney-client relationship with you and no such relationship shall be created by your use of this web site. Such a relationship can only be established to the extent an attorney at Cunningham Dalman, PC expressly agrees to undertake the relationship. Please do not communicate to us any information you regard as confidential unless and until we have established a formal attorney-client relationship with you. Any information you send to us before we establish an attorney client relationship may not be privileged or confidential. Information you send to us over the Internet may not be secure.