Association Insights: FSA Administrators Reveal Reactions and Predictions to Recent "Rollover" Announcement

Alegeus Technologies, a benefit services company, recently announced the results of a survey of flexible spending account (FSA) administrators, providing reactions and predictions regarding the recent “FSA rollover” announcement by the US Department of the Treasury. Survey results point to significant employer rollover adoption for the 2014 plan year and modest gains in both FSA enrollment and account contributions.

On October 31, 2013, the US Treasury Department modified its so-called “use-it-or-lose-it” provision, giving employers the option of allowing participants to roll over up to $500 of unused funds at the end of the plan year. Previously, any funds remaining in an FSA at the end of the plan year (or after a grace period) were forfeited to the employer. Following the announcement, Alegeus conducted a survey of more than 200 FSA administrators, which revealed:

• When asked which option will be more compelling to participants, nearly 80 percent of survey participants indicated that “rollover” will be more compelling than “grace period.”

• Although employers have the option of amending 2013 FSA plans to include the rollover, 47 percent of survey respondents predict that less than a quarter of employers will do so.

• In contrast, rollover adoption for 2014 FSA plans is anticipated to be more significant—with 33 percent of survey respondents predicting that more than half of employers will adopt, and 22 percent predicting more than 75 percent will adopt.

• For plan year 2014, the majority of survey respondents predict a 10–25 percent growth in both FSA enrollment and account contributions as a result of this rule change; anecdotal feedback from Alegeus clients suggests that those numbers could climb higher in subsequent plan years.

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