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Flexible Spending Account Plans – Modification of Use-It-Or-Lose-It Rule for Health FSAs

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October 2013

The IRS released Notice 2013-71, which provides a deviation from the longstanding “use-it-or-lose-it” rule for health FSAs. The rule permits employers to amend their Section 125 cafeteria plan documents, to allow employees to carry over up to $500 of unused amounts remaining at the end of the plan year in a health FSA. Such amounts could be used to reimburse plan participants for qualified medical expenses incurred in the following plan year. The carryover option provides an alternative to the current grace period rule for health FSAs. 

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