Still time to take advantage of new FSA rule
By Dan Cook
Now that the IRS has made health flexible spending accounts more attractive, it’s time for HR professionals to swing into action.
The IRS is now allowing a $500 carryover from year to year for FSAs in which employees have dough for medical care. Previously, there was no carryover options — those only applied to traditional employee health savings accounts. The IRS is now narrowing the differences between the two, differences which already had many employees scratching their heads when asked to cite them.
The FSA is now a much better deal for workers, but employers have to get the word out to them if they're to take advantage of it in 2014.
Washington, D.C., benefits lawyer James Napoli has a bit of guidance to offer.
Napoli knows a thing or two about these accounts. He's senior counsel with the law firm Proskauer Rose, where he specializes in employee bennies and comp issues, among other things.
See also: Employees still confused by HSA, FSA differences
“Employers that would like to incorporate the carryover for the 2013 plan year have some time to amend the plan,” said Napoli.
Some basics on the FSA to-do list from Napoli:
1. Notify employees of the carryover allowance, and make sure they say the words back to you to demonstrate their understanding.
2. Explain that this is not the same as the HSA carryover, that each plan has advantages, and that employees must choose the one that works best for their individual situation.
3. Think about adding an opt-out feature so that employees may terminate their participation in the health FSA at the end of any plan year.
The new rule will have far-reaching effects: An estimated 14 million families participate in FSAs.
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.
Originally published on BenefitsPro.com