IRS Eases "Use It or Lose It" Rule for Flex Accounts

The IRS has just announced a significant change in the rule that requires participants in a flexible spending account (FSA or flex) plan to forfeit any amount that has not been used by the end of the plan year. This rule, known as the “use it or lose it” rule, provides that any amount remaining in a participant’s flex account at the end of the plan year cannot be carried over to future years or refunded to the participant. Although the rule permits such amounts to be divided among all participants, the great majority of plans provide for unused balances to simply be forfeited.