Use It or Lose It Rule for Health FSAs May Be Eliminated

August 8, 2012

The Patient Protection and Affordable Care Act amended the Internal Revenue Code to establish a limit of $2,500 on employee contributions to a health flexible spending arrangement (FSA).  The Internal Revenue Service (IRS) has recently announced guidance implementing this provision (IRS Notice 2012-40).  The $2,500 limit does not apply for plan years that begin before 2013. Employers that maintain FSAs will have to amend their plans to conform to these changes by the end of 2014.

The IRS has also indicated that it is considering eliminating the so-called “use it or lose it” rule for health FSAs.  It has requested public comments.

NSBA will be submitting comments in support of eliminating the “use it or lose it” rule for health FSAs.

Click here to read IRS Notice 2012-40.

Comments must be submitted by August 17, 2012.  Comments may be submitted to the following e-mail address: Notice.comments@irscounsel.treas.gov. Include “Notice 2012-40” in the subject line of any electronic communication.

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