The Federal Flexible Spending Account Program (FSAFEDS) is implementing two significant changes effective for the 2015 plan year. Here are the two changes:
- Health care and limited expense flexible spending accounts (FSAs) will no longer have a grace period; instead, qualifying participants will be able to carry over up to $500 of unused funds to the next plan year. Dependent care FSAs will still have a grace period and will not have carryover to the next plan year.
- The minimum annual election for all three types of FSAs will be reduced from $250 to $100.
The Internal Revenue Service (IRS) changed the FSA use-or-lose rule last Fall by allowing carryover for health care FSAs. Therefore, FSA programs can now allow their participants to carry over up to $500 of unused health care FSA funds from one plan year to the next. The IRS restricts carryover to health care FSAs that are not using a grace period. Programs must eliminate the grace period for their health care FSAs before they can implement the carryover.
FSAFEDS currently has a grace period which adds 2.5 months to the end of the annual benefit period for FSAs. During this grace period, participants can incur eligible expenses for reimbursement from their prior year’s balance. Qualifying 2014 participants will still have the grace period in the first 2.5 months of 2015.
Participants have from January 1, 2014 through March 15, 2015 to incur eligible expenses for reimbursement from their 2014 account. Participants must be employed by an agency participating in FSAFEDS and actively making allotments from their pay through December 31, 2014 to participate in the grace period.
For more information, the complete OPM announcement is reproduced below.