In October of last year, the government announced that administrators of Healthcare Flexible Spending Accounts (FSA) could allow employees to roll over up to $500 of unspent FSA money into the following year’s balance . This change was designed up help address the (stupid in my opinion) use-it-or-lose-it nature of these accounts. Per this Reuters article, given the short notice only 8% of U.S. companies adopted this rollover policy in 2014.
As Open Enrollment season for benefits starts for 2015, keep your eyes out for mention of this rollover option. Adoption rates could jump up to 50% now that they’ve had a year to prepare, according to benefits administrator Alegeus Technologies.
If your company does offer a $500 carryover (and your job is stable), then it would be much more appealing to contribute at last $500 even if you are unsure of your future expenses. If you don’t spend all (or any) of it, you can simply roll it over year after year.
Despite the potential tax savings, we stopped contributing to our FSA last year because the company switched to a new (likely cheaper) FSA administrator that made you do everything online while also repeatedly rejecting half our claims without clear explanations as to why. So painful! Thankfully it sounds like everyone else hated them too, as they are back to processing FSA claims in-house.