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Why you'll want to go for the FSA carryover option

Jared Bilski
by Jared Bilski
May 8, 2015
1 minute read
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If your company hasn’t implemented the FSA carryover option yet, you may want to make it a priority.
Firms that adopted the carryover option for 2015 saw a double-digit increase in FSA enrollment among employees, according to a recent study.
What’s more, the study from WageWorks and Visa shows a majority (60%) of employers have either amended or are planning to amend their FSAs to include the carryover.

Participation = savings

As firms know, the carryover rule allows FSA users to carry over up to $500 into the next plan year.
And that $500 doesn’t count toward the ACA limit on FSA contributions ($2,550 for 2015).
Despite the perks, some firms aren’t sold on the carryover option.
For one thing, it means you can’t offer the “grace period” option where leftover FSA funds can be used for expenses incurred in the first two-and-one-half months of the following plan year.
Plus, some firms had gotten used to workers forfeiting FSA funds at year-end and using those funds to administer the accounts.
But, according to WageWorks CCO Jody Dietel, the greater the employee participation in FSAs, the fewer dollars being subject to payroll taxes.
Those savings are likely to make the carryover a “standard design” in FSAs soon, Dietel says.
If employees have gotten used to the FSA grace-period and you’re planning on switching to the carryover, don’t spring the change on workers at the last minute.

Stress carryover benefits

Communication should take place well before open enrollment.
Also, make it a point to stress some of the benefits of the carryover: less worry about spending funds before year-end, $500 carryover is available for the following entire plan year and carryover from one year could rollover year after year.

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