Currently with the 2016 Healthcare FSA and Limited Purpose FSAs that Treasury administers, a carryover is not offered. Instead have a grace period through March 15th of the following year that allows them to incur claims through March 15th and file them by March 31st to be paid. The IRS only allows plans the choice of one or the other:
- Grace period (which Treasury has used) OR
- Carryover of up to $500
We are moving to the carryover with PayFlex in 2017. If an employee has $500 or less left in their healthcare FSA or limited purpose FSA on 12/31/17, up to $500 may be carried over to the next plan year and added to that plan year’s contribution for FSA claims payments. Anything over $500 left in a healthcare FSA or limited purpose FSA (L-FSA) on 12/31/2017 will be forfeited.
The dependent care FSA (DC-FSA) does not have a carryover provision. That means that anything left in the account on 12/31/17 will be forfeited.