Taxpayers who utilize Flexible Spending Accounts (FSAs) are well aware of the ‘use-it-or-lose-it’ rule regarding expending pre-tax money set aside for medical expenses. Previously, any amounts unused by year-end are forfitted.
Under Internal Revenue Code Section 125(j) as added in the Affordable Care Act (also known as ‘Obamacare’), taxpayer are now eligible to roll-over up to $500 of unused funds to a following plan year. The roll-over does not affect the $2,500 contribution maximum in the subsequent year.
Sponsors (employers) must amend their plan to take into account the new elective changes.
Aaron’s Take: The end-of-year rush to spend FSA money will be much less stressful in 2013 and going forward, but don’t take it for granted that your employer has made the necessary changes. Be sure to ask!
Within Honeywell, my understanding is that Health Saving Account is allowed for roll over and there is no limit. Can you please validate this?
They may have a plan called a ‘Health Savings Account’ or ‘Healthcare Reimbursement Arrangement’ which are subject to different rules. The alphabet soup of Healthcare reimbursement issues is very complicated. Health Savings Accounts were the first of their kind, and generally were a tax-free reimbursement of the first $2,500 of medical expenses, but were ‘use-it-or-lose-it’ if you didn’t spend the entire amount in the calendar year.