Treasury Relaxes Time Limits For Flexible Spending Accounts

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Treasury Relaxes Time Limits For Flexible Spending Accounts

By TOM HERMAN
Staff Reporter of THE WALL STREET JOURNAL
May 19, 2005; Page D2

The Treasury Department agreed to let employers give their workers more time to spend money set aside in flexible spending accounts.

These accounts, also known as FSAs, are used by millions of employees to pay for health- and dependent-care expenses with pretax dollars. Until now, employees have been required to use up their entire accounts by the end of each plan year, or lose the balance.

Under the new rule, employers can extend the deadline by as much as 2½ months. For example, a company whose plan year ends Dec. 31, 2005 could extend the deadline to March 15, 2006.

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The new rule doesn't change the "use it or lose it" requirement, which is the major reason millions of people eligible for FSAs choose not to sign up. But Sen. Jim DeMint, (R., S.C.), and Sen. Ken Salazar, (D., Colo.), said yesterday they plan to fight for legislation to modify it.

The two senators support legislation allowing as much as $500 of unused FSA funds to be carried forward to use in the next year, or contributed to a health savings account. "FSAs are already very helpful tools, but we can make them better," said Sen. DeMint.

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