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Aon Hewitt Submits Comments on Possible Modifications for Health FSAs | Aon

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Aon Hewitt Submits Comments on Possible Modification of Use-or-Lose Rule for Health FSAs


On August 17, 2012, Aon Hewitt submitted comments to the Internal Revenue Service (IRS Notice 2012-40) regarding possible modifications to the health flexible spending arrangements (health FSAs) "use-or-lose" rule as added by the Patient Protection and Affordable Care Act (Affordable Care Act). The Notice, published on May 30, 2012, provides guidance on the application of the new $2,500 limit on salary reduction contributions to health FSAs. As part of the guidance, the IRS requested comments on whether to modify the use-or-lose rule that is currently set forth in the proposed regulations with respect to health FSAs.

In the comment letter, Aon Hewitt proposes the following modifications to the use-or-lose rule and provides rationale for those modifications. Aon Hewitt asks the IRS to consider allowing employers to use the following allowable rollover methods for unused health FSA dollar amounts:

  • The first-in-first-out (FIFO) method; or
  • The last-in-first-out (LIFO) method.

Aon Hewitt also recommends that the Treasury and IRS modify the use-or-lose rule to give employers the option to offer a cash-out of up to $750 of unused health FSA contributions. Additionally, Aon Hewitt proposes that the agencies retain the existing rules governing health FSAs. The full comment letter is available below.

Aon Hewitt Comments on Notice 2012-40



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