Important announcement regarding FSA policy

Moments ago, the Department of Treasury issued a press release and informational fact sheet announcing a major policy change relating to flexible spending accounts (FSAs) that has many positive implications for all FSA constituents – including administrators, employers and participants. The Department of Treasury has modified its FSA “use-it-or-lose-it” provision to allow a limited rollover of FSA funds. Details are as follows: • Effective in plan year 2014, employers that offer FSA programs will have the option of allowing participants to roll over up to $500 of unused funds at the end of the plan year. • Effective immediately, employers that offer FSA programs that do not include a grace period will have the option of allowing employees to roll over up to $500 of unused funds at the end of the current 2013 plan year. From my perspective, the major benefits of this new “rollover” provision include: • Eliminating the most significant impediment to FSA adoption (use-it-or-lose-it) – creating significant upside for FSA adoption growth, which has been limited over the past several years • Enhancing healthcare options and offering greater funds protection for FSA participants, particularly lower & middle income workers who are highly concerned about cash flow • Minimizing risk for constituents with unpredictable healthcare expenses, such as those dealing with chronic conditions that may necessitate high-cost procedures/services with ambiguous timing or medical necessity • Curbing wasteful & potentially unnecessary end-of- year spending by FSA participants seeking to avoid losing unused funds