The Tax Relief and Health Care Act of 2006 allows employees to elect to directly roll over amounts remaining in their flexible spending accounts (FSAs) or health reimbursement accounts (HRAs) at the end of a plan year into health savings accounts (HSAs). Rollovers must be made into HSAs by January 1, 2012. The IRS has issued a notice covering these rollovers.
Grace-Period Plans Only
In general, employees covered by high-deductible health plans (with HSAs) can't be covered by any health plan that isn't a high-deductible health plan. This precludes employees from also having general-purpose FSAs or HRAs. In addition, FSAs are allowed a 2½-month grace period after the end of a plan year during which employees may submit receipts to use up the last year's contributions.
The first key point the notice makes is that these rollover rules apply only with respect to FSAs that offer the 2½-month grace period. The not...(register to read more)