Treasury releases guidance helping soldiers keep health FSAs funds

The Treasury Department and Internal Revenue Service have issued Notice 2008-82, which protects reservists from losing funds in their health Flexible Spending Arrangement (health FSA) accounts after being called to active duty.

The Heroes Earnings Assistance and Relief Tax Act of 2008, enacted June 17, 2008, provided a special rule allowing "qualified reservist distributions" (QRDs) of unused amounts in a health FSA to reservists called to active duty. Under the existing rules for health FSAs, distributions could only be made to reimburse substantiated medical expenses, and any funds left unspent at the end of the plan year would be lost. This special rule allows reservists to make a distribution before leaving for active duty so as not to lose those savings.

The guidance clarifies that:

  • The provision is optional for employers;
  • Health FSAs must be amended if an employer wants to allow QRDs; a transition rule allows plans to be amended effective retroactively to provide for QRDs prior to January 1, 2010;
  • QRDs are included in the income and wages for the reservist;
  • Employees may request a QRD when they receive an order or call to active duty, and before the last day of the plan year (and grace period, if applicable); and
  • Employers may allow employees to continue to participate in the health FSA after the QRD if amounts remain in the health FSA.

You may like these other stories...

By Jason Bramwell, Staff WriterA recent survey of nearly 100 US financial executives by Deloitte LLP found that 42 percent of respondents pointed to the Affordable Care Act as the reason they had to pass further health care...
By Ken Berry Flexible spending accounts (FSAs) used for health care expenses just became slightly more flexible. On October 31, the IRS announced that employers can modify the "use-it-or-lose it" rule...
Dementia has become the number one cause of disability globally, according to the World Health Organization. Stroke, which can also profoundly impair judgment and decision making, stands at number two. "This year,...

Upcoming CPE Webinars

Jul 16
Hand off work to others with finesse and success. Kristen Rampe, CPA will share how to ensure delegated work is properly handled from start to finish in this content-rich one hour webinar.
Jul 17
This webcast will cover the preparation of the statement of cash flows and focus on accounting and disclosure policies for other important issues described below.
Jul 23
We can’t deny a great divide exists between the expectations and workplace needs of Baby Boomers and Millennials. To create thriving organizational performance, we need to shift the way in which we groom future leaders.
Jul 24
In this presentation Excel expert David Ringstrom, CPA revisits the Excel feature you should be using, but probably aren't. The Table feature offers the ability to both boost the integrity of your spreadsheets, but reduce maintenance as well.