Officially known as flexible spending arrangements, F.S.A.s let you set aside some of your pay, pretax, to cover out-of-pocket health costs. Roughly two-thirds of employers offer them, according to a report from the Society for Human Resource Management.

It used to be that an unspent balance in an F.S.A. had to be forfeited at the end of the year. Even though many employers allowed an additional grace period of two and a half months, the risk of losing the funds made some people wary of using the accounts.

Late last year, however, the federal government changed the rules, giving employers the option to allow as much as $500 to be carried over in an F.S.A. from one year to the next. That means you do not have to worry about losing the money if it is not all spent before the end of the year; no more rushing out to buy a new pair of eyeglasses that you don’t really need. Employers must choose between offering the carry-over option or a grace period to their workers — they cannot offer both.

via New Rules Allow Carry-Over of Flexible Health Funds – NYTimes.com.

Posted by Lewis J. Saret, Co-General Editor, Wealth Strategies Journal.