After IRS released IRS Notice 2005-42 providing an additional two months to incur and receive payments for expenses under a Flexible Spending Account, DataPath surveyed its clients and industry partners in an effort to effectively develop a response. The results of that survey, often expected but also resulting in some surprises.

Here are just some of the more interesting findings. (You can click here to read the complete "Notice 2005-42 Survey and Analysis" including a copy of the survey).

• We were surprised to learn that 44% of respondents expected the employer to implement the ruling with less than a 2½ month grace period. We anticipated a lower number.

• A similar number of respondents plan to market and implement the ruling with less than a 2½ month grace period. This desire to build a custom plan for employers is possibly an attempt to find a way to maintain some FSA forfeitures to offset administrative expenses.

• A significant number of respondents (28%) feel that employers will demand different caps on the carryover amount. About the same number (21%) applied to whether respondents would market and implement flexible cap structures.

• A large number of respondents (42%) thought that employers would demand different run out periods by benefit types for submission of claims. However, an overwhelming majority of respondents themselves (76%) did not want to market or administer this option.

Although the findings were not that surprising overall, it is apparent that there are enough administrators and employers who want flexibility with regards to run outs, caps, benefit application, and the grace period itself that software vendors will need to make their solutions as dynamic as possible.