The Bush administration has declined to try to use regulatory authority to ease current restrictions on use of flexible spending account assets.[@@]
Today, employers must take unused FSA assets back at the end of the tax year, even though employees have funded the accounts with contributions from their own earnings.
The employee benefits industry has argued that the U.S. Treasury Department has the authority to modify the current “use it or lose it” rules without going to Congress to seek changes in the laws that govern FSAs.
But Treasury Secretary John Snow rejected that argument in a letter sent to Sen. Charles Grassley, R-Iowa, chairman of the Senate Finance Committee, in late December.
Treasury does not believe it has the authority to let FSA holders keep unused assets in the accounts after the end of the year, Snow writes.
But “Treasury continues to look for creative solutions to the problem,” Snow writes.
Snow says Treasury might be able to establish a brief administrative grace period that would delay application of the use-it-or-lose-it rule.