flexible spending account rollover

flexible spending account rollover

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flexible spending account — n. A savings account in which an employee can save tax free a portion of his or her earnings to meet a specific type of expense. abbrv. FSA See also cafeteria plan, health savings account The Essential Law Dictionary. Sphinx Publishing, An… … Law dictionary

Flexible spending account — A flexible spending arrangement (FSA), or Flexible Spending Account, as they are commonly called, is one of a number of tax advantaged financial accounts that can be set up through a cafeteria plan of an employer in the United States. An FSA… … Wikipedia

Flexible Spending Account - FSA — A type of savings account available in the United States that provides the account holder with specific tax advantages. Set up by an employer for an employee, the account allows employees to contribute a portion of their regular earnings to pay… … Investment dictionary

Dependent Care Flexible Spending Account (FSA) — A flexible spending account (FSA) designed to provide tax exempt funds to employees for childcare or dependent expenses. Dependent care FSA contributions are typically exempt from federal income tax, FICA and state income taxes (in most states),… … Investment dictionary

Flexible — Things known as Flexible include:*Flexible electronics *Flexible response *Flexible mold *Flexible employment *Flexible fuel vehicle *Flexible rake receiver *Flexible spending account *Flexible single master operation *Flexible baton round… … Wikipedia

Flexible-fuel vehicle — For other types of vehicles, see Alternative fuel vehicle and Hybrid vehicle. The Ford Model T was the first commercial flex fuel vehicle. The engine was capable of running on gasoline or ethanol, or a mix of both. A flexible fuel vehicle (FFV)… … Wikipedia

Health savings account — A Health Savings Account (HSA) is a tax advantaged medical savings account available to taxpayers in the United States who are enrolled in a High Deductible Health Plan (HDHP). The funds contributed to the account are not subject to federal… … Wikipedia

Medical savings account (United States) — Health care in the United States Public health care Federal Employees Health Benefits Program Indian Health Service Medicaid Medicare Military Health System / TRICARE State Children s Health Insurance Program (SCHIP) Veterans Health… … Wikipedia

Health Reimbursement Account — Health Reimbursement Accounts, or Health Reimbursement Arrangements, (HRAs) are IRS sanctioned arrangements that allow an employer, as agreed to in the HRA plan document, to reimburse for medical expenses paid by participating employees. HRAs… … Wikipedia

Health spending accounts — or HSAs are a tax free health benefit vehicle available to employers for employees residing in Canada. They were introduced in 1986 by Canada Revenue Agency (CRA) in their interpretation bulletin entitled IT 85R2. What is an HSA? A Health… … Wikipedia

Tax-Free Savings Account — The Tax Free Savings Account or TFSA was introduced by Jim Flaherty, Canadian federal Minister of Finance, in Budget 2008. It was a significant measure in the budget and will be coming into effect on January 1st, 2009. [“Get ready for new Tax… … Wikipedia

Rollovers for Flexible Spending Accounts


WASHINGTON — Workers taking advantage of special tax-free accounts to pay out-of-pocket medical expenses could soon be allowed to carry over up to $500 from one year to the next.

For nearly 30 years, employees eligible to use the accounts had to forfeit any unspent money at the end of the year.

A new rule will now permit employers to let plan participants roll over up to $500, the Treasury Department said Thursday.

Employers sponsoring the plans, however, are not required to offer the option.

Some plan sponsors may be eligible to start letting workers carry over the money at the end of this year, Treasury said in its announcement. Others may have to wait until next year to start offering the feature.

“Today’s announcement is a step forward for hardworking Americans who wisely plan for health care expenses for the coming year,” Jacob Lew, the Treasury secretary, said in a statement.

The accounts, known as flexible spending accounts, allow employees to contribute up to $2,500 a year from their pay, before taxes are deducted. The accounts can then be used to pay certain medical expenses not covered by insurance, including co-pays.

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The Treasury says an estimated 14 million people use the accounts.

Employees generally decide how much to set aside in the accounts before the start of the year. Because it can be difficult to estimate medical expenses a year in advance, some people are discouraged from taking advantage of the accounts.

“Allowing Americans who have one of these accounts to roll $500 over to the following year just makes sense and will give people more help to pay for out-of-pocket health care costs,” said Senator Orrin Hatch, Republican of Utah.

“I’d like to see more done to expand these critical accounts that empower the individual to make informed health care decisions using money they saved,” Mr. Hatch said.

Some plans give workers up to two and a half months at the start of the year to spend the money in the accounts. The new rule says plans can offer either a grace period or the $500 rollover, but not both.

A version of this article appears in print on November 1, 2013, on Page B5 of the New York edition with the headline: Rollovers for Flexible Spending Accounts. Order Reprints | Today's Paper | Subscribe

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Rule Change Allows Rollover For Flexible Spending Accounts

Flexible Spending Accounts, or FSAs, allow employees to set aside money from their monthly paychecks to pay for such things as medical expenses or dependent child care that are not covered by insurance. Each year, they can accrue up to $2,500 without payroll taxes, but if the set-aside amount isn't used before the end of the calendar year, it is forfeited.

The change, announced Thursday, modifies a 30-year-old restriction and now allows workers to carry over up to $500 into the next calendar year without being penalized.

Secretary of the Treasury Jacob Lew said in a statement that the "announcement is a step forward for hardworking Americans who wisely plan for health care expenses for the coming year."

About 14 million Americans use FSAs. But it can be difficult to predict how much will be used from the account, and the prospect of losing unused money has discouraged many people from using the accounts.

"With less risk of such forfeitures now, experts predicted that more workers, particularly lower- and moderate-income employees, would take advantage of the deductions for everyday medical expenses, such as co-pays, over-the-counter drugs and other items not normally covered by health insurance.

" 'We are always looking for ways to provide added flexibility and common-sense solutions to how people pay for their healthcare,' Lew said.

"Treasury officials began taking public comments on the change last year, and they said the response was overwhelmingly in favor of giving workers more leeway.

"The new rules go into effect immediately, but they aren't mandatory for employers. Firms can decide whether to make the change and when to make it."

Find Out Whether Your Flexible Spending Account Can Roll Over

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Find Out Whether Your Flexible Spending Account Can Roll Over

You can’t carry over the entire balance from year to year, but you can carry over $500. That’s at least enough to keep you from rushing to get new glasses on December 28. A growing number of employers are switching over to the rollover model, even though employers get to keep any money in their employees’ FSAs at the end of the year. (Employers often contribute money to the accounts, so that isn’t as terrible an idea as it sounds like at first.)

One benefits administrator pointed out to Bloomberg that letting workers keep their FSA balances actually saves companies money, since using more money from the accounts cuts down on the employer’s portion of payroll taxes, too.

Does money in a Flexible Spending Account (FSA) roll over?

As of 2015, according to IRS regulations, the maximum amount of funds in a Flexible Spending Account (FSA) that can be carried over from one calendar year to the next is $500. Any amount of money in excess of the $500 carryover allowance left in an FSA at the end of the year is forfeited. Therefore, it is a good idea for employees with FSAs to check their account balances near the end of the year to make sure they do not leave funds in the account that are then lost at the beginning of the year.

What Is a Flexible Spending Account?

An FSA is a type of savings account that can be established as part of an employer's cafeteria plan of employee benefits. The employee selects an amount of money to be deducted from each paycheck and deposited into his FSA. Using an FSA is tax-advantageous because funds deposited in the FSA are pretax deferrals that are not subject to federal income tax or Social Security tax withholding, and are usually not subject to state income tax withholding either. Thus, the employee's total taxable income for the year is reduced by the total amount contributed to the FSA.

Contribution Limits and Carryover

As of 2015, the IRS allows a maximum yearly contribution to an FSA of $2,500 per individual. The minimum annual contribution amount an employee can designate in setting up an FSA is $100.

The carryover allowance of $500 is a recent policy change by the IRS, implemented in 2014. Prior to the policy change, employees could not carry over any amount of their remaining FSA funds from one year to the next. This policy discouraged many employees from establishing FSAs for fear of losing unused funds at the end of the year.

Expenses Eligible for Payment With FSA Funds

Employees with FSAs can use the funds in their accounts to pay for virtually any regular medical or dental expenses, such as prescription or over-the-counter medicines, dental expenses, eye exams and glasses, chiropractic treatments and psychological counseling. FSA funds are commonly used to supplement health insurance plans by paying deductibles or required co-pays with FSA money.

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