Treasury eases ‘use it or lose it’ healthcare rule

The Obama administration is relaxing longstanding regulations requiring people to guess how much money to set aside in employer-sponsored Flexible Spending Arrangements.  

The Internal Revenue Service announced Thursday it is authorizing employers to allow workers to carry over up to $500 dollars of unspent money from the accounts each year.

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Roughly 14 million American families participate in Flexible Spending Accounts, which allow them to put aside up to $2,500 for out-of-pocket healthcare expenses before taxes.

Under previous “use it or lose it” provisions, any unused money in the accounts is forfeited. Those rules, in effect for the last 30 years, essentially force participants to bet how much money they should set aside for the expenses.

The new rules are meant to reduce the risk associated with the guessing game.

“Across the administration, we are always looking for ways to provide added flexibility and commonsense solutions to how people pay for their healthcare,” Treasury Secretary Jack Lew said in a statement. “Today’s announcement is a step forward for hardworking Americans who wisely plan for health care expenses for the coming year.”
 
The change, effective this year, is optional for companies that offer the plans, a senior Treasury Department official said Thursday.

“It’s ultimately the employer’s decision,” the official said. 

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