Employee Flexible Spending Accounts at Issue
Many employers have cafeteria plans for their employees, and before now, it was thought that employers who funded Flexible Spending Accounts (PSAs) could not hold over any unspent funds they provided for the employee from one year to the next.
New interpretations by officials with the Internal Revenue Service are changing this mindset. Based on the original 1989 regulations, employers can, indeed, carry over funded programs from one year to the next.
While employees may not carry over any funds, the advantages of employers being able to do so is attractive for workers because it may mean that more employers will fund healthcare benefits.
The officials did make it clear, however, that the IRS never intended that regulations apply to employer-funded FSAs without any employee pretax contributions and those that are not part of a cafeteria plan.