- 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.
- Importantly: Employees need to be educated as renewals occur. “Use it or Lose it” has been a major roadblock to increased FSA participation in the past. This change may significantly improve employee perception of and participation in Flexible Spending Accounts.
Under the Patient Protection and Affordable Care Act, the amount an employee can set aside in an FSA dropped to $2,500 this year. The $500 carryover won’t reduce the $2,500 maximum a worker can contribute to a FSA each year, Treasury officials said.
For a copy of IRS Notice 2013-71, please click on the link below: http://www.irs.gov/pub/irs-drop/n-13-71.pdf
The IRS also provided us with guidance on both the cost of living adjustment for health FSA’s and the monthly 2014 limits for qualified transportation fringe benefits.
Health FSAs: For 2014, the dollar limitation on employee salary reduction contributions to health FSAs is unchanged at $2,500.
Qualified Transportation Fringe Benefits: For 2014, the monthly limit on the amount that may be excluded from an employee’s income for qualified parking benefits is $250 (a $5 increase from the 2013 limit of $245). The combined monthly limit for transit passes and vanpooling expenses for 2014 is $130 (a $115 decrease from the 2013 limit).
The substantial decrease is due to expiration of the temporary “rule of parity” that made the combined limit for transit and vanpooling the same as the parking limit for 2012 and 2013. Whether Congress will eventually extend the rule of parity to 2014 is uncertain.
The IRS also provided us with guidance on both the cost of living adjustment for health FSA’s and the monthly 2014 limits for qualified transportation fringe benefits.
Health FSAs: For 2014, the dollar limitation on employee salary reduction contributions to health FSAs is unchanged at $2,500.
Qualified Transportation Fringe Benefits: For 2014, the monthly limit on the amount that may be excluded from an employee’s income for qualified parking benefits is $250 (a $5 increase from the 2013 limit of $245). The combined monthly limit for transit passes and vanpooling expenses for 2014 is $130 (a $115 decrease from the 2013 limit).
The substantial decrease is due to expiration of the temporary “rule of parity” that made the combined limit for transit and vanpooling the same as the parking limit for 2012 and 2013. Whether Congress will eventually extend the rule of parity to 2014 is uncertain.
