Flexible Savings Accounts
The Obama administration recently loosened rules governing health-care savings accounts known as flexible-spending arrangements, or FSAs, allowing consumers to roll over as much as $500 in unused funds each year.
The change—likely to be popular with consumers—modifies the use-it-or-lose-it rule that has governed the tax-advantaged accounts for decades.
Currently, FSA accounts are used by about 14 million families. They allow employees to set aside pretax dollars to pay for many health expenses that aren't covered by insurance, such as deductibles or dental and vision services.
FSA plans provide significant benefits and in 2013 allows employees to contribute up to $2500 pretax dollars into a account. Since 2005 FSA account holders have been allowed a 2 1/2 month grace period for spending down their FSA. Now employers will be able to offer the grace period and or the $500 rollover provision, though not both. Employers can also opt to offer neither.
Allowing FSAs to roll $500 over will help reduce wasteful end of the year spending previously seen under the old rule and should encourage more people to sign up for an FSA.