The Treasury Department and the IRS issued new rules related to Flexible Spending Arrangements -- which allow employees to pays for uncovered or unreimbursed medical costs with pre-tax funds -- in an effort to ease the year-end spending rush prompted by the current FSA deadline.
The Treasury issued Notice 2005-42, which will allow employers to modify FSAs to extend the deadline for reimbursement of health and dependent care expenses up to 21/2 months after the end of the plan year.
Previously, employees were required to "use-or-lose" FSA funds by the end of the year. Under the old rules, any unspent funds at year's end would be forfeited.
The text of the notice is available at www.treas.gov/press/releases/reports/n0542.pdf.
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