Articles

Change to FSA Rollover Rule by Nancy M. Valdes, CPA


Posted on September 25, 2014

In 2014, the U.S. Department of Treasury ended its use-it-or-lose-it policy on Flexible Savings Accounts (FSAs) by allowing employees with FSA to rollover up to $500 of unspent funds into the following year.

Flexible Spending Accounts (FSAs) allow workers to set aside up to $2,500 in pre-tax money annually to pay for certain out-of-pocket medical and dental health care costs, including copayments, deductibles, medications and specific equipment and supplies required for diagnosis and treatment. Funding for these plans come from employees’ voluntary salary reduction elections and, at times, employer contributions. In the past, plan participants would lose any money left over in these accounts at the end of the year, unless their employers provided a grace period. However, beginning with the 2014 tax year, workers whose employers adopted FSA rollover policies may carry over up to $500 of unused funds for use during the following tax year. For plans beginning after Dec. 31, 2012, employees may receive payment or reimbursement of unused funds to pay for qualifying medical expenses in the following plan year.

Employees should check with their employers to determine if their companies adopted FSA rollover policies and plan accordingly during the Fall enrollment period for contributing to their plans for the 2015 tax year.

About the Author: Nancy M. Valdes, CPA, is a senior tax manager in Berkowitz Pollack Brant’s Tax Services practice.  She can be reached at the Miami CPA firm’s office at (305) 379-7000 or via email info@bpbcpa.com.