A Versatile Spending Account (FSA) permits people to put aside pre-tax {dollars} to pay for certified healthcare bills. A key function is the flexibility to hold over a restricted quantity of unused funds from one plan yr to the following. The utmost quantity that may be carried over into the 2024 plan yr is a predetermined determine set by the IRS. This carryover provision supplies added flexibility for account holders who could not spend their complete FSA steadiness inside the preliminary plan yr.
The carryover choice mitigates the “use-it-or-lose-it” rule that traditionally ruled FSAs, lowering the danger of forfeiting unspent funds. This provision encourages higher participation in FSAs and helps people extra confidently allocate funds for healthcare wants, figuring out a portion might be retained for future bills. The institution of a carryover restrict supplies a steadiness between encouraging accountable spending and providing significant flexibility. Previous to the institution of carryover guidelines, many FSAs operated below a strict forfeiture coverage for any unused quantities, resulting in rushed spending on the finish of the plan yr.
