If this bill passes, employees that are able to carry over unused FSA funds will have the option of using that money to bolster their nest eggs.
The bill we’re referring to is H.R. 4067, and it was introduced by Rep. Ron Kind (D-WI).
It will allow workers to transfer unused FSA funds to their retirement plans – 401(k)s, etc. –
each year. Specifically, employees would be able to transfer up to $250 to their retirement accounts.
Carryover vs. grace period
In order to take advantage of the rollover this bill will allow, employers would have to use the FSA carryover option.
The IRS amended the FSA regs in 2013 to allow employees to carry over up to $500 in unused FSA funds to the following plan year — instead of only allowing a “grace period,” the two-and-a-half months following the plan year where leftover FSA funds can still be used.
However, the FSA regs are clear: The carryover essentially cancels out the “grace period.” According to the feds, the $500 FSA carryover is an alternative to the grace period, and both options may not be offered during the same plan year.