A new modification for flexible spending accounts was released at the end of October. Employers can now allow $500 in unused benefits to roll over into the next year.
What are Flexible Spending Accounts?
These types of accounts are sponsored through the employers and are funded 100 percent by the employee. Employees can use their pre-tax dollars to pay for medical expenses. This could include prescription drugs, doctor visits, vision or dental expenses, and so on.
Ever since FSAs were invented, they have operated under a “use it or lose it” policy, which means that any money that was not used that calendar year would be given to the employer. The federal government wants to give employees more flexibility when it comes to these accounts. Employers can offer a better grace period or the $500 rollover rule, but not both, to employees with these types of accounts. It is estimated that 14 million families throughout the U.S. use these types of accounts in order to fund their medical needs.
The new rules can provide more flexibility and they also mean that families do not have to rush to spend all of the money on the card before time runs out. Previously, this was a problem for families with more on the card than they needed. The rollover rules allow them to make use of the money on the cards without having to worry about missing out on using it.