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Cincinnati, OH   513.621.2120     |     Covington, KY   513.621.8900

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Cincinnati, OH   513.621.2120

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Covington, KY   513.621.8900

IRS Announces Change to the“Use It or Lose It” Rule for FSAs

Posted on November 27, 2013November 27, 2013

Strauss Troy - IRS Announces Change to "Use it or lose it" rule for FSAsAmend Your Cafeteria Plan Now
To Allow for a $500 Rollover

The IRS has announced that Cafeteria Plans (also known as 125 Plans, FSAs and Flexible Spending Accounts) can permit up to $500 to be “rolled over” into the following year – softening the “use it or lose it” rule that had been the hallmark of these accounts. 

In order to allow for this rollover, a plan has to be amended. 

Items to Consider

  • To take advantage of the rollover, your plan must be amended.
  • If your plan provides for a “grace period” allowing the account balance for one plan year to be spent in the first few months of the following year, this $500 rollover cannot be used. You may want to amend your plan to eliminate the grace period; if so, the amendment to remove this provision would have to be done by year end.
  • The rollover is limited to $500 each year and cannot be accumulated.

Next Steps

  • Contact your provider or administrator immediately if you want to implement this change for the 2013 Plan Year.
  • If your Cafeteria Plan was drafted by Strauss Troy, and you have not received an e-mail, please contact Claudia Allen at cgallen@strausstroy.com or 513-629-9462.
  • If you need assistance amending your Cafeteria Plan, or if you have questions, contact Claudia.
  • Click here for a copy of IRS Notice 2013-71.

Posted in: Corporate | Business, Labor | Employment, Published Articles, Tax Planning | Compliance

Tagged: 125 Plan, 2013 Play Year, Amendment, attorney, business, Cafeteria Plan, Cincinnati, Claudia Allen, corporate, covington, employment, Flexible Spending Account, FSA, human resources, IRS, kentucky, Law, law firm, lawyer, Lawyers, Legal, northern kentucky, Notice 2013-71, ohio, Rollover, small business, Strauss Troy, tax, tax planning, Use it or lose it

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