IRS announces Changes in Health Expense Accounts for 2015.
Health Flexible Spending Accounts (FSAs) are used to save pre-tax dollars to pay for healthcare expenses. They must be used within a plan year.
Since 2013, you have been allowed to roll over $500 from an FSA into the next plan year. However, there is a change coming in 2015 that may restrict the benefit for those who are considering contributing to a Health Savings Account (HSA).
If a taxpayer has a balance in their FSA at the end of 2014 and they choose to carry over $500 of it into 2015, the taxpayer, under the new rules it seems would be ineligible to participate in an HSA in 2015. This restriction does not apply to FSAs for specific uses, such as dependent care or dental expenses.
Based on this new restriction, you should plan ahead and balance the benefit of each option. If you want to set up an HSA for 2015, it may actually be better not to carry forward those unused FSA amounts, even if it means that you will lose them.
The annual dollar limit on employee contributions to employer-sponsored healthcare flexible spending arrangements (FSA) rises to $2,550, up $50 from the amount for 2014.