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ARTICLE · 25 NOVEMBER 2013

IRS Modifies The FSA Use-Or-Lose Rule For 2013 Plan Year And Beyond

Reinhart, Boerner, Van Deuren SC
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On October 31, 2013, the Internal Revenue Service released Notice 2013-71, modifying the "use-or-lose" rules applicable to Flexible Spending Accounts contained in Internal Revenue Code section 125 cafeteria plans.

United StatesEmployment and HR
Steven Huff
Steven Huff
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On October 31, 2013, the Internal Revenue Service (IRS) released Notice 2013-71 (Notice), modifying the "use-or-lose" rules applicable to Flexible Spending Accounts (FSAs) contained in Internal Revenue Code (Code) section 125 cafeteria plans. Currently, plans may either impose a use or lose rule requiring all amounts in the FSA be used by the last day of the plan year, or plans may include a "grace period" that permits a plan to allow a participant to use funds remaining in an FSA to cover medical expenses incurred during the first two and one-half months of the next plan year. Plans may now allow participants to carry over to the subsequent plan year up to $500 of unused amounts remaining in a participant's account at the end of a plan year. However, a plan may not allow participants to utilize both the grace period rule and the new $500 "carryover" rule.

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