As it stands now, the "use-it-or-lose-it" rule requiring unused health FSA amounts to be forfeited at the end of a plan year.will stay. Much discussion has gone on during the last couple of years to eliminate this rule or to modify it by limiting the forfeited amount to only the excess of $500.

In response to a request by Senator Grassley (Chairman of the Senate Committee on Finance) that the Treasury modify this rule, a letter from John W. Snow, Secretary of the Treasury, stated that the Treasury does not have sufficient legal authority to change the rule. The Treasury has also concluded that the rule's elimination would "impact other important health care priorities", citing an estimation by their economists that the number of Health Savings Accounts (HSAs) would possibly be reduced by up to ten percent.

However, Secretary Snow assured Chairman Grassley that the Treasury would continue "to look for creative solutions to resolving this issue that are consistent with an appropriate reading of the laws and regulations". Secretary Snow went on to mention one possible approach that would provide a brief administrative grace period when applying the use-it-or-lose-it rule, thus extending the period to submit claims to slightly longer than one year.

Click here to view the Treasury's letter to Chairman Grassley.