Relief for Procrastinators–IRS Relaxes Cafeteria Plan “Use-it-or-Lose-it” Rule
After years of warning flexible spending account (“FSA”) participants about the “use-it-or-lose-it” rule, the IRS has issued a notice that provides a very significant exception to the rule and allows FSA participants to receive reimbursement for expenses INCURRED up to 2 1/2 months after the end of the plan year. Although most FSAs already have a grace period for submission of expenses after the end of the plan year, the expense is reimbursable only if it was incurred during the preceding plan year. Notice 2005-42 expands this rule by allowing reimbursement of expenses even if they are incurred during the first 2 1/2 months of the subsequent plan year. View full article (PDF).