Employees with flexible savings accounts will be given an additional 2.5 months to use the funds, according to a rule finalized by the Treasury Department Wednesday. [@@]

Health insurance and benefits industry lobbyists had been pushing the agency for some time to allow employees to roll over the funds indefinitely.

The existing regulation says employees must use the money deposited in FSAs during the calendar year in which the money is deposited or lose it at the end of the year. FSAs allow workers to use pre-tax dollars for medical expenses.

A staff official at America’s Health Insurance Plans says the trade group supported the change and has been lobbying the agency for some time to change the rule to allow workers to completely roll over their funds in the accounts from year to year.

People with health savings accounts already have that authority, the AHIP official noted.

Sen. Charles Grassley, R-Iowa, chairman of the Senate Finance Committee, wrote a letter to the agency in November seeking the change.

When informed of the new policy, Grassley said, “This is great news for Americans struggling to keep up with rising health care costs. The so-called ‘use it or lose it’ rule has discouraged millions of Americans from using flexible spending accounts. It’s caused millions more to waste or forfeit precious health care dollars.”

The new rule will give workers with FSAs more time to pay for medical and dependent care expenses and will relieve the spending rush at year-end caused by the prior rule, Treasury Secretary John Snow said.

FSAs allow employees to pay for uncovered or unreimbursed medical costs with pre-tax funds. FSAs are different than HSAs in that they do not allow individuals and families to roll over their funds from one year to the next.