Flexible spending accounts (FSA) that are linked to employer sponsored health insurance plans (i.e. HMO or PPO) just got better. Now employees who use FSA’s will be permitted to carry over up to $500 of their unused plan balance to the next year. FSA’s permit employees to set aside pre-tax dollars in the beginning of each year to pay for out of pocket expenses like deductibles or co-payments. In the past, if you did not use all of the dollars in your FSA, the unused dollars went back to the employer. This announcement was made in late October, 2013 by US Treasury and IRS officials for plans years beginning in 2014.
Employees can contribute up to $2,500 a year into the Flexible Spending Account to pay for ‘out of pocket’ expenses including qualified medical, dental and vision expenses not reimbursed by your health insurance plan. The FSA must be first set by the employer. Only employee contributions are permitted; no employer dollars are allowed.
Check with your tax advisor for more details and any application for you.