Companies can allow employees to carry over some flex dollars

Q&A with Brandon Long

published in The Oklahoman | October 1, 2014

When offered by an employer, flexible spending accounts (FSAs) provide employees the opportunity to contribute up to $2,500 of their pre-tax earnings each year to pay for certain eligible healthcare expenses. While these accounts require employees to use the entire elected annual amount within the designated plan year — typically January through December — or forfeit any unused amount, there are two exceptions to this “use it or lose it” rule.

In an interview with The Oklahoman, attorney Brandon Long explained that one option for employers is to provide their employees with a 2½-month grace period (following the end of the applicable 12-month period) in which they can use any remaining funds in their FSA accounts. The other option, which the IRS created just last year, allows employees to carry over up to $500 in unused funds from one year to another.

“An employer that wishes to allow the $500 FSA carryover needs to amend their FSA to allow it,” said Long. “The employer’s FSA also cannot have a grace period.”