The IRS announced an easing in the use it or lose it rules for flexible spending accounts. The new rules allow flexible spending plans to allow employees to carry over up to $500 from one year to the following year without forfeiture. This change means that workers won’t have to hurry to clean out their accounts by year-end, or by March 15 if their plan has adopted the 2 ½ month grace period.
In order to adopt the change, employers must amend their plans. Plans will not be allowed to use both the 2 12 month grace period and the $500 carryover. Employers can implement the carryover for 2013 as long as the flex plan is amended by the end of next year. Plans that currently use the 2 ½ month grace period must be amended by the end of 2013 to formally eliminate the grace period.