H&W: Updated Health FSA Carryover and Cafeteria Plans

Updated Health FSA Carryover and Cafeteria PlansThe IRS has updated health FSA carryover and cafeteria plans that impacts Section 125 Cafeteria Plans and health Flexible Spending Accounts (FSAs). An overview of this guidance is listed below with links to additional information on Compliancedashboard.

$500 Carryover

The IRS has modified the “use-or-lose” rule for health FSAs, allowing participants to carryover (instead of forfeiting) up to $500 of unused amounts remaining at year end. See the Compliance Activity, IRS Notice 2013-71 or IRS Fact Sheet for more information.

Mid-Year Election Changes for Non-Calendar Year Plans

To give individuals access to plans offered through the Marketplace when they first become available, the IRS has provided transition relief to allow individuals in non-calendar year cafeteria plans to make mid-year changes to salary reduction elections. In other words, they can cancel their current salary reduction that applies toward the purchase employer provided insurance and instead purchase a plan through the Marketplace exchange. See the Reference Material or IRS Notice 2013-71 for more information.

$2,500 Health FSA Limit

As a reminder, if your Health FSA plan must be amended to comply with the $2,500 salary reduction limit that was effective Jan. 1, 2013, it can be made retroactively no later than Dec. 31, 2014. See the Reference Material for more information.

Compliancedashboard will continue to be updated as new guidance is released.

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