A few months back, the Internal Revenue
Service issued a ruling permitting employers to amend their flexible
spending plans (health and dependent care) to give employees a two and
a half month grace period following the close of the plan year to use
up funds deposited in a flexible spending account during the plan year.
The ruling gave employers the discretion to amend their plans to allow
this additional time, but employers were not required to do so. Prior
to the ruling, funds had to be used by the close of the plan year.
According to a new survey, about half of U.S. employers are planning
to give employees the extra time to use their funds in health care flex
spending accounts. And the majority of those employers say they’ll make
the changes this year.
Join us this fall in San Francisco for the California Employment Law Update conference, a 3-day event that will teach you everything you need to know about new laws and regulations, and your compliance obligations, for the year ahead—it’s one-stop shopping at its best.
However, just one-third of employers surveyed said they plan to
offer the grace period for both health and dependent care flex
spending. Ninety-seven percent of employers surveyed have both health
and dependent care flex spending plans.
Seventy percent of the employers who plan to offer the grace period
only for their health care plans and not for dependent care said that
the key reason for the disparity is that dependent care expenses are
more predictable than health expenses, so the extra time isn’t needed.
Also, 50 percent reported that they’ve had no problems with
forfeitures.
The survey was conducted by Deloitte Center for Health Solutions and the ERISA Industry Committee.