HR: Use It or Lose It
If lawmakers have their way- the rules of Flexible Spending Accounts may soon be changing. 
Flexible Spending Accounts- also known as FSAs were originally introduced back in the 1970’s, as a tool to help employees save for “out of pocket” medical expenses on a pre-tax basis. Unfortunately, many employees have been discouraged from participating in FSAs because of the “use it or lose it” rule. The “use it or lose it” rule basically requires account holders to forfeit any unspent funds in their accounts at the end of each year.
New legislation has recently been introduced which would allow employees to cash out unused balances in their account at the end of the year and report these amounts as taxable income. The Medical Flexible Spending Account Improvement Act was introduced in hopes of increasing participation in FSAs.
Supporters of the bill believe the “use it or lose it” rule is no longer necessary because of a provision in the PPACA that will cap FSA contributions at $2500. This cap will become effective in 2013 and will help keep FSAs from being used as tax shelters.
With out of pocket health care expenses on the rise, FSAs are becoming an increasingly important benefit to help families save for medical costs. Eliminating the “use it or lose it” rule will give employees more freedom to manage their own health care costs- with fewer penalties.