• IRS Announces Change to the "Use it or Lose it" Rule for FSAs
  • December 3, 2013 | Author: Claudia G. Allen
  • Law Firm: Strauss Troy Co., L.P.A. - Cincinnati Office
  • Amend Your Cafeteria Plan Now To Allow for a $500 Rollover

    The IRS has announced that Cafeteria Plans (also known as 125 Plans, FSAs and Flexible Spending Accounts) can permit up to $500 to be “rolled over” into the following year - softening the “use it or lose it” rule that had been the hallmark of these accounts.

    In order to allow for this rollover, a plan has to be amended.

    Items to Consider

    • To take advantage of the rollover, your plan must be amended.
    • If your plan provides for a ”grace period” allowing the account balance for one plan year to be spent in the first few months of the following year, this $500 rollover cannot be used. You may want to amend your plan to eliminate the grace period; if so, the amendment to remove this provision would have to be done by year end.
    • The rollover is limited to $500 each year and cannot be accumulated.

    Next Steps

    • Contact your provider or administrator immediately if you want to implement this change for the 2013 Plan Year.