USA Today Examines Increased Grace Period for FSAs

USA Today on Tuesday examined the Treasury Department's decision in May to allow companies to give employees with flexible-spending accounts until March 15 to spend money in the accounts before forfeiting the funds. Previously, participants were required to give up any leftover money at the end of the calendar year.

The ruling gives companies the option of extending the grace period, but they are not required to do so. About half of the country's largest employers with FSA plans are offering the extended grace period this year, according to an August survey by Deloitte Consulting, with more companies expected to participate in the extended period for the 2006 benefits package. Companies have until Dec. 31 to change their 2005 plans.

Many companies have not turned to the extended grace period this year because the Treasury Department ruling came in the middle of the year, making it administratively difficult to change plans for 2005, according to Tom Billet, senior benefits consultant with Watson Wyatt.

In addition, Martha Priddy Patterson, director of employee benefits policy at Deloitte, said some employers might not be exploring the grace period because they are turning away from FSAs in favor of health savings accounts, which do not require the money in an account to be used by a certain date (Block, USA Today, 11/1).