What if employees do not use all of the money that they deposit in their FSAs by the end of the plan year?
FSAs are subject to a “use it or lose it” rule, which was recently modified. The original rule stated that any unused funds by the end of the plan year would be forfeited. Recently, the rule was modified, allowing employers to provide their employees a two-and-one-half month grace period immediately following the end of a plan year to use up funds for the previous year. At the end of this grace period, any unused funds that remain would be forfeited.
