IRS Allows Rollover of Health FSA Funds! Eliminating the Use it or Lose it Rule!

By Ric Joyner, Founder (MBA, CEBS, GBA, RPA, CFCI)

Summation: This notice provides an alternative to the 2.5 grace period with a $500 rollover of funds thus giving employees the ability to rollover/carryover (not build up) $500 the previous plan year. The notice provides that money carried over can be used for the old or new plan year.

Key Points of  notice:

1. When does it start? 2013 plan years.  Most employers will engage for plan years starting 1-1- 2014. See software challenge comment.

2. Only for Health Flexible Spending Account. The other FSAs such as Daycare FSA are not affected.

3. The employer is required to amend their plan with this language.

4. The employer’s plan must not have the grace period rule. This is the 2.5 month additional time to file for claims from the previous plan year. The employer can still have a plan year run out which is sometimes 90 days.  Strategy; It is permissible to stop the grace period for 2013, thus not engaging the 2.5 month grace period and can replace it with the $500 carryover. See software  issue below.

5. Does not affect the $2,500 cap currently in place. In other words, the employee could enroll for $2,500 in 2014 and carryover $500 thus totaling $3,000 for the year.

6. The $500 is for the new plan year expenses AND the previous plan year. Meaning that only $500 from the previous play year is allowed and must be used during the current new plan year for expenses from either plan year. Hence, my comment that this notice REPLACES the 2.5 grace period rule. The notice creates more flexibility for the use of the dollars and for length that.

7. Employer is not required to offer the carryover.

Software challenges will be an issue for most TPAs for the first six months (Nov 2013 to March of 2014) as software vendors provide updated software code to accommodate this new notice and the rollover. Check with your TPA as to the effective date of their “go live” on the carryover. eflex should be ready for plan years soon.

Amendments for your plans are $75.00. Let us know if you wish to amend your plan for the carryover.


Full Notice is posted at:


Compliance Seminar on all the recent changes and strategies to help save money and time is coming. Watch for emails.



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About rjoyner

Ric Joyner, CEBS, GBA, CFCI Customer Experience Officer Ric is a founder of a national web based TPA for Cafeteria, HRA, HSA, Transit, VEBA and COBRA plans. eflexgroup is a leader in self-service employee benefit systems. eflexgroup was the first TPA in the industry to go “online” in 1999 allowing employees to self-serve 24 hours per day. He has lead the industry with eflex by placing provable customer service statistics, live, on Ric is celebrating his 32nd year employee benefits. He helped create TPAs such as TASC and Employee Benefits Corporation in Madison WI. He was a licensed insurance agent for 29 years. The designations Mr. Joyner holds are; Certified Employee Benefits Specialist, Group Benefit Associate, Certified Flexible Compensation Instructor, board approved by ASPA to teach Cafeteria Plan regulations. Ric also has a bachelors of science in Information Technology and MBA (emphasis is project management) and graduated summa cum laude from Capella University with a 4.0. Ric helped found the National Association of Professional Benefit Administrators ( NAPBA is dedicated to training administrators in best practices and grass roots lobbying. Ric has served in the past as the Wisconsin Association of Health Underwriters State President in 2003. Ric is a frequent speaker and article writer for prestigious associations such as,, Wisconsin SHRM, Austin SHRM,, International Foundation of Employee Benefits, Tampa Bay AHU, WI AHU, Florida AHU, Florida NAIFA and participates on the List Serves (compliance programs for Consumer Driven Products of NAHU and International Foundation of Employee Benefits)

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