A rule change recently announced by the Office of Personnel Management will allow federal workers to carry money on their flexible spending accounts into the next year.
Beginning in 2015, employees will be able to carry over up to $500 into the next year. Previously, any unspent money in these accounts would be lost each year (i.e. “use or lose”) which would discourage participants from saving more in these types of accounts. Lawmakers said this would encourage participants to just spend money they didn’t have to as the end of the year approached to avoid losing it.
Some Senators that represent districts with a lot of federal employees as well as federal employee unions are excited to see this change to FSAs.
The new rules “should encourage more employees to participate and take advantage of the savings in taxable income,” J. David Cox Sr., national president of the American Federation of Government Employees, said in a statement.
Senator Ben Cardin (D-MD) added, “Allowing Federal workers to roll over some FSA funds into the next year just makes sense. Starting in 2015, federal workers can contribute to FSA without fear of losing all their FSA funds at the end of the plan year or being forced to purchase unnecessary items meet an artificial deadline.”
Senator Mark Warner (D-VA) said, “I’m very pleased that OPM has agreed with us that federal employees should be able rollover up to $500 of unused FSA funds. It was completely unfair to expect individuals to accurately predict their medical expenses a year in advance. This is great news for federal employees and their families.”
In May of 2013, Senator Cardin and Senator Michael Enzi (R-WY) introduced the Medical FSA Improvement Act of 2013 (S. 966) to reform FSA laws. In November 2013, the Treasury Department issued a rule, based largely on S.966, giving private sector employers the option to allow their employees to roll over up to $500 of their FSA funds to the following year, or provide a grace period to use available funds in the following year. Senator Cardin then led the entire Democratic Caucus in December of 2013 on a letter to OPM Director Kathleen Archuleta in calling for the rules change that OPM has just announced.
The full announcement and guidelines from OPM are included below.