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Mercer

New IRS guidance on health flexible spending arrangements (FSAs) addresses what COBRA rights and employer constraints may apply to carryovers. The Q&As are effective for plan years starting after Dec. 16, 2015 (Jan. 1, 2016, for calendar-year plans), although employers may rely on this guidance for earlier periods. Employers that permit health FSA carryovers should work with vendors to consider compliance issues, and some also may want to take advantage of the new permitted carryover restrictions.

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Employees can set aside tax-free funds to pay for child care and health care expenses through flexible spending accounts (FSAs). Over the years, FSAs have become a standard offering among large employers; they are relatively inexpensive to administer and can be a source of significant savings for employees. Mercer’s National Survey of Employer-Sponsored Health Plans 2014 found that 88% of employers with 500 or more employees offer a health care FSA and 85% offer a child care FSA.

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