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IRS considers modifying FSA 'use it or lose it rule

Theres a chance the FSA use it or lose it rule could be a thing of the past.

By Jody Dietel | Updated on July 30, 2012

I’m perpetually shocked at the high percentage of Americans who forgo enrollment in flexible spending accounts (FSAs). Given how these accounts are exclusively designed to save you up to 40 percent on your out-of-pocket health care expenses, why wouldn’t you want to sign up and keep more of the money you earn? 

While I’ve received a variety of responses to this question, the top barrier cited is the dreaded “use it or lose it” provision, which forces participants to forfeit or quickly spend up any unused money in their FSA at the end of the plan year. In response, I always suggest new participants ease into the program and only set aside a small amount to cover their known out-of-pocket health expenses, but I’m getting off topic.

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