When you’ve spent several years of your professional life dedicated to a goal, the moment it comes to fruition can seem a bit surreal. For leaders in the flexible spending account arena who have been working toward eliminating the annual use-it-or-lose-it provision to these plans, the Oct. 31 decision by the Internal Revenue Service to allow $500 to carry over to the next plan year was a long time coming.
“This is a big deal. This is probably the biggest event for flexible spending accounts in the 30 or so years since it was implemented,” says Bob Natt, executive chairman, Alegeus Technologies. “We consider this a major change that’s going to be great for the participants.”
Bart McCollum, chief operating officer at AmeriFlex, agrees: “This [is] ... a big windfall for the people that use FSAs, primarily middle class people who need to manage out-of-pocket health care expenses.”
Employers have the option to continue offering a grace period, where participants have 14.5 months to spend dollars accumulated in their FSA account during a plan year, or switch to the $500 rollover option, but can’t offer both. Natt, McCollum and Jody Dietel, chief compliance officer at WageWorks, all expect the vast majority to choose the $500 route. “Most employers will embrace this because they know that it’s more and more difficult for employees to take responsibility for their out-of-pocket costs, which tend to be very high deductibles and co-payments,” Natt says of the rollover option.
In fact, he even encourages employers who already had open enrollment materials out to employees before the FSA change was announced to give employees a second chance to enroll in an FSA program for 2014. There is “no reason not to amend the plan document to allow for this,” says McCollum. “There’s virtually no downside.”
An employer may be tempted to stick with the grace period over the $500 rollover to compensate for any employees who might have a high-dollar claim at the beginning of the year, then leave the company, because such an instance would leave the bill in the employer’s hands, says McCollum. “Some employers see that risk, people spending all that money early then leaving and not recouping it through payroll deductions, they see the forfeitures at the end of the year as a way for accounting for that risk,” he explains. Even so, he doesn’t expect anyone to advise an employer to think that way.
Impediment gone
WageWorks’ Dietel is thrilled to see “the No. 1 impediment to participants enrolling” in FSAs gone. She notes that the use-it-or-lose-it rule has also “been the No. 1 incentive to rush to spend and purchase unnecessary health care at the end of the year and during the grace period.”
Now that the fear of forfeiting funds is alleviated, Dietel expects FSA enrollment to increase greatly from the current approximately 20% who do so now. She is satisfied with the IRS’s $500 amount as well, considering industry estimates put the average forfeiture around $100 to $300 a year for most participants. “For most Americans who are leaving dollars on the table in their health FSA they will be covered easily by this $500 roll-over period,” she says.
When you’ve spent several years of your professional life dedicated to a goal, the moment it comes to fruition can seem a bit surreal. For leaders in the flexible spending account arena who have been working toward eliminating the annual use-it-or-lose-it provision to these plans, the Oct. 31 decision by the Internal Revenue Service to allow $500 to carry over to the next plan year was a long time coming.
“This is a big deal. This is probably the biggest event for flexible spending accounts in the 30 or so years since it was implemented,” says Bob Natt, executive chairman, Alegeus Technologies. “We consider this a major change that’s going to be great for the participants.”
Bart McCollum, chief operating officer at AmeriFlex, agrees: “This [is] ... a big windfall for the people that use FSAs, primarily middle class people who need to manage out-of-pocket health care expenses.”
Employers have the option to continue offering a grace period, where participants have 14.5 months to spend dollars accumulated in their FSA account during a plan year, or switch to the $500 rollover option, but can’t offer both. Natt, McCollum and Jody Dietel, chief compliance officer at WageWorks, all expect the vast majority to choose the $500 route. “Most employers will embrace this because they know that it’s more and more difficult for employees to take responsibility for their out-of-pocket costs, which tend to be very high deductibles and co-payments,” Natt says of the rollover option.
In fact, he even encourages employers who already had open enrollment materials out to employees before the FSA change was announced to give employees a second chance to enroll in an FSA program for 2014. There is “no reason not to amend the plan document to allow for this,” says McCollum. “There’s virtually no downside.”
An employer may be tempted to stick with the grace period over the $500 rollover to compensate for any employees who might have a high-dollar claim at the beginning of the year, then leave the company, because such an instance would leave the bill in the employer’s hands, says McCollum. “Some employers see that risk, people spending all that money early then leaving and not recouping it through payroll deductions, they see the forfeitures at the end of the year as a way for accounting for that risk,” he explains. Even so, he doesn’t expect anyone to advise an employer to think that way.
Impediment gone
WageWorks’ Dietel is thrilled to see “the No. 1 impediment to participants enrolling” in FSAs gone. She notes that the use-it-or-lose-it rule has also “been the No. 1 incentive to rush to spend and purchase unnecessary health care at the end of the year and during the grace period.”
Now that the fear of forfeiting funds is alleviated, Dietel expects FSA enrollment to increase greatly from the current approximately 20% who do so now. She is satisfied with the IRS’s $500 amount as well, considering industry estimates put the average forfeiture around $100 to $300 a year for most participants. “For most Americans who are leaving dollars on the table in their health FSA they will be covered easily by this $500 roll-over period,” she says. When you’ve spent several years of your professional life dedicated to a goal, the moment it comes to fruition can seem a bit surreal. For leaders in the flexible spending account arena who have been working toward eliminating the annual use-it-or-lose-it provision to these plans, the Oct. 31 decision by the Internal Revenue Service to allow $500 to carry over to the next plan year was a long time coming.
“This is a big deal. This is probably the biggest event for flexible spending accounts in the 30 or so years since it was implemented,” says Bob Natt, executive chairman, Alegeus Technologies. “We consider this a major change that’s going to be great for the participants.”
Bart McCollum, chief operating officer at AmeriFlex, agrees: “This [is] ... a big windfall for the people that use FSAs, primarily middle class people who need to manage out-of-pocket health care expenses.”
Employers have the option to continue offering a grace period, where participants have 14.5 months to spend dollars accumulated in their FSA account during a plan year, or switch to the $500 rollover option, but can’t offer both. Natt, McCollum and Jody Dietel, chief compliance officer at WageWorks, all expect the vast majority to choose the $500 route. “Most employers will embrace this because they know that it’s more and more difficult for employees to take responsibility for their out-of-pocket costs, which tend to be very high deductibles and co-payments,” Natt says of the rollover option.
In fact, he even encourages employers who already had open enrollment materials out to employees before the FSA change was announced to give employees a second chance to enroll in an FSA program for 2014. There is “no reason not to amend the plan document to allow for this,” says McCollum. “There’s virtually no downside.”
An employer may be tempted to stick with the grace period over the $500 rollover to compensate for any employees who might have a high-dollar claim at the beginning of the year, then leave the company, because such an instance would leave the bill in the employer’s hands, says McCollum. “Some employers see that risk, people spending all that money early then leaving and not recouping it through payroll deductions, they see the forfeitures at the end of the year as a way for accounting for that risk,” he explains. Even so, he doesn’t expect anyone to advise an employer to think that way.
Impediment gone
WageWorks’ Dietel is thrilled to see “the No. 1 impediment to participants enrolling” in FSAs gone. She notes that the use-it-or-lose-it rule has also “been the No. 1 incentive to rush to spend and purchase unnecessary health care at the end of the year and during the grace period.”
Now that the fear of forfeiting funds is alleviated, Dietel expects FSA enrollment to increase greatly from the current approximately 20% who do so now. She is satisfied with the IRS’s $500 amount as well, considering industry estimates put the average forfeiture around $100 to $300 a year for most participants. “For most Americans who are leaving dollars on the table in their health FSA they will be covered easily by this $500 roll-over period,” she says.
