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One Simple Thing Companies Could Do to Save Workers a Fortune in Taxes

The U.S. Treasury Department says it would be fine for workers to roll over some of the unused money in their flexible spending accounts
It's time to stock up.
Photographer: Getty Images

The tax advantages of a flexible spending account are well known — they let you sock away as much as $2,550 of your pretax income for doctor bills and other medical costs. Those benefits, though, are offset by one big drawback: Any money unused gets handed over to the employer that administers the plan. That’s a bitter pill to swallow, and may explain why fewer than one in three people use an FSA.

It doesn’t have to be this way. In October 2013 the U.S. Department of the Treasury approved a rule to let workers carry over $500 in unspent FSA money from year to year. A small but growing number of companies has adopted the provision. As of now, Alegeus Technologies estimates about 20 percent of companies have done so, up from 8 percent in 2014, but they have until the end of the year to sign up. Benefits administrator WageWorks (which also provides services to Bloomberg employees) has been encouraging employers to make the change, and so far 40 percent of its 45,000 employers have signed up. “We’re seeing growing adoption every day,” says Jody Dietel, chief compliance officer at WageWorks.