Press Room
 

FROM THE OFFICE OF PUBLIC AFFAIRS

To view or print the PDF content on this page, download the free Adobe® Acrobat® Reader®.

May 18, 2005
JS-2456

Treasury and IRS to Provide More Time to Spend
FSA Funds

WASHINGTON, DC -- Today the Treasury Department and the IRS issued Notice 2005-42 which will allow employers to modify Flexible Spending Arrangements (FSAs) to extend the deadline for reimbursement of health and dependent care expenses up to 2½ months after the end of the plan year.  Previously, employees were required to "use-or-lose" FSA funds by the end of the year.  Under the old rules, any unspent funds at year's end would be forfeited.

"The new rule will give workers with FSAs more time to pay for medical and dependent care expenses and will ease the year-end spending rush prompted by the prior rule," stated Treasury Secretary John Snow.  "Putting people back in charge of their own care is one of the most important things we can do to strengthen our health care system.  That's why President Bush has made it a priority to make it easier to access and pay for care through FSAs and to encourage consumer driven health care initiatives such as Health Savings Accounts."

FSAs allow employees to pays for uncovered or unreimbursed medical costs with pre-tax funds.  FSAs are different than Health Savings Accounts (HSAs), which allow individuals and families with high-deductible health care plans to set pre-tax money aside for health expenses.  Unlike an FSA, which must be spent within a certain period of time, HSAs can be rolled over from one year to the next.

 

REPORTS