Health Care Flexible Spending Account Amendments Due Dec. 31
Health Care Flexible Spending Accounts (FSAs) allow employees to redirect pretax income to an employer-sponsored plan that pays, or reimburses them for, qualified medical expenses not covered by insurance. A maximum employee contribution limit of $2,500 went into effect in 2013. (Employers can set a lower limit, however, and there will continue to be no limit on employer contributions to FSAs.)
Employers that haven’t yet done so must amend their plans and summary plan descriptions to reflect the $2,500 limit (or a lower one, if they wish) by Dec. 31, 2014.
While you’re making those amendments, you may want to consider another amendment: allowing a $500 rollover.
Generally, an employee loses any FSA amount that hasn’t been used by the plan year’s end. But last year the IRS issued guidance permitting employers to amend their FSA plans to allow up to $500 to be rolled over to the next year. However, if your plan was previously amended to allow a 2.5-month grace period for incurring expenses to use up the previous year’s contribution, you cannot add the rollover provision unless you eliminate the grace period provision.
Questions about amending your FSA plan, or adding FSAs to your benefits offering? Contact our CPAs and advisors in Michigan, Houston or Ft. Lauderdale with questions related to taxes and employee benefits.
This publication is distributed for informational purposes only, with the understanding that Doeren Mayhew is not rendering legal, accounting, or other professional opinions on specific facts for matters, and, accordingly, assumes no liability whatsoever in connection with its use. Should the reader have any questions regarding any of the news articles, it is recommended that a Doeren Mayhew representative be contacted.
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