Only a few days into it, we can already expect 2014 to become an exciting year in the world of Consumer-Directed Benefits.
Since the change of the “Use It or Lose It” rule for Healthcare Flexible Spending Accounts (FSA) by the U.S. Department of the Treasury on October 31, 2013, many employers have already adopted or are considering adoption of the new rule.
And no wonder! Under the new rule, employers can now offer their employees the option to carry over up to $500 in unused Healthcare FSA funds at the end of the plan year, instead of losing them.
Here’s why this makes a big difference for employees and employers alike:
- The challenge of correctly estimating the optimal annual contribution amount for the entire plan year, coupled with the fear of losing any unused funds, kept many employees from participating in a Healthcare FSA in the first place.
- Those employees who did participate often underfunded their account and ended up running out of their pre-tax benefit only months into their plan year.
- The new rule removes the obstacle of potentially losing unused funds, making a Healthcare FSA more flexible and easier for employees to use. Less risk, less worry, more control. And from what we hear from employees, they love it!
At WageWorks, we were able to offer employers the ability to change to their Healthcare FSA plan immediately, making the carryover option available as early as for the 2013 plan year. And we made it easy: a plan amendment document is available here.
To date, hundreds of our employer clients have already adopted the carryover option, and most are planning on making the change this year.
What about you? As you determine your benefit plans for 2014, please let us know if we can help you with any questions you might have about your Healthcare FSA.
In this spirit, we wish you and your employees a happy, healthy, and productive new year.