Hunton Employment & Labor Perspectives

On October 31, 2013, the Internal Revenue Service issued Notice 2013-71, which modifies the “use or lose” rule for flexible spending accounts (FSAs) and permits employers to amend their section 125 “cafeteria” plans to allow employees to carry over up to $500 in unused FSA contributions to the next plan year.

Is your cafeteria plan ready for the new health care flexible spending account (FSA) employee contribution limit?  Beginning in 2013, the Patient Protection and Affordable Care Act (ACA) limits the maximum amount that an employee can elect to contribute to a health care flexible spending account (FSA) to $2,500 per year.  While plan sponsors could, prior to ACA, impose limits on the amount of elective employee contributions to a health care FSA, there was no statutory limit.