What is the IRS “grace period” and how does it work?
ANSWER The IRS has established the grace period rule to help offset some of the risk of the use it or lose it rule. If your plan contains the grace period provision (many plans do not) then monies left in your Flex Accounts at year-end do not forfeit immediately. Instead, this provision provides an additional time period (grace period) to actually spend down your account balance at year-end. The time frame may be up to 2.5 months after plan year-end.
