IRS Requests Comments on Potential Modification of Use-or-Lose Rule for Health FSAs

On May 30, the Internal Revenue Service (IRS) issued Notice 2012-40 to provide guidance on health flexible spending arrangements (health FSAs).  Among other things, the IRS notice requests comments on the potential modification of the “use or lose rule” for health FSAs.  Currently, the use-or-lose rule prohibits any contribution or benefit under an FSA from being used in a subsequent plan year or period of coverage. Thus, unused amounts in the health FSA are simply forfeited at the end of the plan year.

Comments are due by August 17, 2012.