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A Change to Flexible Spend Accounts

At the end of October, the Treasury Department and the Internal Revenue Services announced a change to the 29-year-old rule that requires participants of flexible spending accounts to use their balances or forfeit the balance at the end of the year. The much-needed change is a huge step forward for hard-working Americans who use the money to pay for health care expenses throughout the year.

The modification to the ‘use-it or lose-it’ rule now allows participants to rollover up to $500 at the end of each year. The Treasury Department predicts that this modification will cut back on wasteful spending at the end of each year. For many people, the rollover option will be very helpful because the accuracy of what goes into the account will not have to be so precise, they will have some flexibility.

Employers will be given an option at the end of the year. Right now, they have the option of giving flexible account participants a 2 ½ month grace period for their account. They will then lose all the money at the end of the 2 ½ months. The other option is the $500 rollover. The rollover does not have a limit on the time, and can be carried over each year as necessary.

There are a few critics of the new plan that include people who would like to see the entire balance rollover instead of just $500, but the overall response to the new proposal is surprise and pleasure. The Treasury Department and IRS are moving in the right direction, and many people are welcoming the change.

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