In October, the U.S. Treasury Department modified its “use-it-or-lose-it” provision, giving employers the option of allowing participants to roll over up to $500 of unused funds at the end of the plan year (see “Treasury Permits Carryover of FSA Amounts”). Previously, any funds remaining in an FSA at the end of the plan year or after a grace period were forfeited to the employer.
Following the Treasury Department announcement, Alegeus Technologies, a provider of health care and benefit payment services, based in Waltham, Massachusetts, conducted a survey of more than 200 FSA administrators. When asked which option will be more compelling to FSA participants, nearly 80% said “rollover” will be more compelling than “grace period.”
Although employers have the option of amending this year’s FSA plans to include the rollover, 47% of administrators predict that less than one-quarter will do so. Rollover adoption for 2014 FSA plans is anticipated to be more significant; 33% of administrators predict that more than half of employers will adopt the rollover, and 22% predict that more than 75% will.
For plan year 2014, the majority of respondents predict a 10% to 25% growth in both FSA enrollment and account contributions as a result of this rule change. Anecdotal feedback from Alegeus clients suggests those numbers could climb higher in subsequent plan years.
“The new rollover provision is wonderful news for employers and employees alike, since it gives them greater flexibility and control over their health care decisions,” says Tom Torre, Alegeus’ CEO. “This policy change has been universally well received by our clients, who are very excited by its potential to drive measurable impact on both FSA enrollment and account contributions. All are eager to fully understand the nuances of the new rule and the practical considerations for implementation, so that they can capitalize on this forecasted growth.”