New IRS rule re: FSA time period

Did anyone else see the latest IRS ruling about FSA's? Essentially, the time period for INCURRING claims can be extended 2.5 months beyond year-end. I'm interested in implementing - anyone else? I do need to learn more about how the two years would coordinate if someone signs up for an FSA each year (e.g. automatically apply claims from first 2.5 months to prior year until max is hit and then apply to current year?)

Here's a link to the ruling:


  • 13 Comments sorted by Votes Date Added
  • Yes. I received the same information. I passed it along to our President to see if they wanted to amend our Flex Plan.

    I would think anyone continuing FSA each year would have their claims automatically applied as you stated IF they had any money remaining from the previous year.

    BTW, our TPA will not charge any additional fees for this service.
  • This is good for those who have not been able to meet the medical allotment for the year it allows an extra 2 1/2 months to make it up before losing it.

    But without this grace period you still have 90 days after year end to submit receipts for medical expenses AS LONG AS the receipts are prior to the year end. Some of us may have used the allotment just have not submitted the receipts timely.

    Does this new grace period continue this?
  • I was thinking it was kind of a negative. We'll never get the books closed on the previous year. Quit procrastinating, incur your claims, get them in and let me get the books closed. With all the over-the-counter stuff that's allowed, it shouldn't be too hard for employees to use up their account. That's my attitude.
  • hunter1 -
    It may be a negative as far as book closure but I was refering mostly for ees who when they enroll think they will utilize a certain amount then at year end they still have a balance owed to them but no receipts it gives them a chance to make it up and not worry that it is past the year end date. Then if they don't summit the receipts then they are SOL. It's a second chance to use it or lose it.

  • Lisa: I generally sound tougher than I really am. I was discussing this with my payroll clerk yesterday and she thinks it would be a good idea, too. Really, though, it just postpones the inevitable. The first year, employees get 14.5 months to use their money, then, the new deadline is just 12 months away again. We may amend our plan just to give employees a new 'perk' at no cost.
  • I don't particularly care for it either. The whole point of an FSA is to "estimate" how much you will need in medical reimbursements.

    If you know your deductible is $500.00 and your co-pay is $20.00 and you estimate going to the doctor three times that year, why would anyone elect to contribute $5,000 rather than $560.00?

    If an employee over contributes and then complains about losing the money my personal opinion is that person was irresponsible with calculating their contribution amounts.

    I'm sure we will implement it though. G*d forbid we don't give them every possible perk in the book.

    (Geesh, I'm being awful negative today - I need to go take a happy pill)
  • Once again, it looks like the lawmakers didn't really think this through. If you think about it, if a plan amends for this, then it's about March 15 to incur claims, then, if a plan has a 90-day period after the plan year plus the grace period to claim expenses after that, then you are at June 15, and all claims have potentially (most certainly) not been paid yet, and if the 5500 requirement is still in effect, the deadline for filing is July 31, for a calendar year plan. Accounting for the plan has to be done before the 5500 in terms of total benefits, etc.

    A basic nightmare for plan administrators, and, in my opinion, a very superficial "perk" for those who fall into the "lose it" part of use it or lose it because of faulty planning/calculation.
  • I agree that it just postpones the inevitable. Also, the first year, you have 14.5 months to send the money (3/15); doesn't that mean the following year you only have 12 months to use your money (3/15 to 3/15)?
  • Luckily it is an optional policy and you do not have to offer the full 2 1/2 months grace period, that is up to your company to decide to offer this or not.

    I believe every year after inception you have up to 14 1/2 months to use your allotment. So up to 2 1/2 months of the previous plan year will run at the same time as your current year.
  • I'm voting against it. The same people who cannot plan for 12 months won't be able to plan for 14 1/2 months. At least that's the way it is at our company. Also, our TPA will charge extra.

  • After amending the plan (i.e., during the current plan year), each year thereafter participants will have the 12 months plus the 2.5 months to incur expenses. If you have the grace period, you have to use the previous year's unused amounts before you can use the current plan year election amounts. The plan year remains the same, for all purposes.
  • This is generous of the IRS, but very confusing. I am thinking that we will amend our plan to allow for the extension, but not promote it unless we notice someone with a large balance near the end of the year.
  • Clare - When you say you "won't promote it" do you mean you do not intend to advise your ee's of this benefit in advance?
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