In the fall of 2013, the U.S. Treasury Department issued new rules allowing employers a $500 carryover option for their employees’ FSA money. Many companies had to work quickly to determine the viability of offering this new option versus going with the grace period allowing employees to roll over their entire unused account balance into the following year to pay for medical expenses incurred during the first 2 ½ months of the next plan year before the money is forfeited. Other organizations were already in the process of their 2014 open enrollment period and thus began their consideration of offering the new FSA option for their 2015 plan year. The Flexible Spending Account Benchmark Study gathered results from participants in all company sizes regarding their FSA approach in 2013 through 2015. Flexible spending accounts (FSA) provide employees a way to deduct pretax dollars from their paycheck to pay for certain types of medical, vision and dental expenses. These accounts offer companies a way to help employees manage their health care costs.

1. 2014 Flexible
Spending
Accounts (FSAs)
B E N C H M A R K S T U D Y
healthcaretrendsinstitute.org

2. 2
2014FLEXIBLESPENDINGACCOUNTS(FSAS
Background
In the fall of 2013, the U.S. Treasury Department issued new rules
allowing employers a $500 carryover option for their employees’ FSA money.
Many companies had to work quickly to determine the viability of offering this
new option versus going with the grace period allowing employees to roll over
their entire unused account balance into the following year to pay for medical
expenses incurred during the first 2 ½ months of the next plan year before the
money is forfeited. Other organizations were already in the process of their
2014 open enrollment period and thus began their consideration of offering
the new FSA option for their 2015 plan year.
The Flexible Spending Account Benchmark Study gathered results
from participants in all company sizes regarding their FSA approach in 2013
through 2015. Flexible spending accounts (FSA) provide employees a way to
deduct pretax dollars from their paycheck to pay for certain types of medical,
vision and dental expenses. These accounts offer companies a way to help
employees manage their health care costs.

3. 3
2014FLEXIBLESPENDINGACCOUNTS(FSAS
Insights:
When the FSA plan changes became effective for plan year 2014, over
half of companies (51%) adopted the rollover option versus 49 percent who
elected to offer a grace period of up to 75 days. In the past, employees may have
forgone signing up for an FSA and the accompanying tax benefits for fear of
losing their pretax money that they put in. It appears employers recognized
the stumbling block of the old use-it-or-lose-it rule, which 68 percent of survey
participants cited as their primary reason to adopt the rollover option in 2014.
In 2014, did your organization:
What was the primary reason you adopted
the rollover option for 2014?

4. 4
2014FLEXIBLESPENDINGACCOUNTS(FSAS
What was the average employee
contribution to his/her healthcare FSA?
What percentage of benefits-eligible
employees participated in a healthcare
FSA in 2014?
Insights:
There was a wide range of responses related to employee participation
in 2014. Nearly 40 percent (37.3%) reported 20 percent to 40 percent participation,
while 26 percent reported up to 20 percent participation, and almost 20
percent said 40 to 60 percent of employees participated in a healthcare FSA.
Employees funded their FSAs with up to $2,500. The largest group at 66.7
percent contributed between $1,001 and $2,000 in 2014, which was a slight
increase from 2013 contributions.

5. 5
2014FLEXIBLESPENDINGACCOUNTS(FSAS
Insights:
In preparing to offer FSA benefits, employers indicated taking a range
of steps. The majority of survey participants (64%) independently researched
the topic, while one-third considered feedback from employees. Almost 30
percent consulted a benefits advisor for insights and advice. While most
companies, at 66 percent, didn’t experience any challenges as a result of
adopting the rollover option, almost 20 percent reported administrative
roadblocks, followed by 17 percent with system compatibility issues.
Others grappled with employee education and communication concerns.
How did you prepare for offering healthcare
FSA benefit in light of 2014 modification?
What challenges did you experience as a
result of adopting the rollover option?

6. 6
2014FLEXIBLESPENDINGACCOUNTS(FSAS
Insights:
Moving forward, a full two-thirds say they will change their systems or processes to better
manage FSA benefits and plan to increase employee communication/education efforts to better
explain the benefit program. Luckily, no challenges were too great to deter from the rollover option
in the foreseeable future. This may explain why almost 67 percent reported that they will be
adopting the rollover option for 2015. There were a wide variety of FSA program communication
tactics respondents said they’d explore for plan year 2015, which include providing a handout
(41.5%) or sending an e-mail (33.8%) to employees to communicate changes.
Did your challenge(s) with adopting the
rollover option result in any of the following?
Are you adopting the rollover option for 2015?
How will you communicate healthcare FSA
benefits to employees in 2015?

7. 7
2014FLEXIBLESPENDINGACCOUNTS(FSAS
Why did you choose not to adopt the
rollover option for 2015?
Insights:
Planning for plan year 2015, there were a number of reasons given
for not wanting to adopt the rollover option including 37 percent did not
want to change their system or processes to manage the change and 20.4
percent did not want to increase employee communication efforts to explain
the new benefit and are happy with the grace period option. However, of
those that did not offer the rollover option in 2014, 40.5 percent stated they
will consider the option in the future.
Will you consider offering the rollover
option in the future?

8. 8
2014FLEXIBLESPENDINGACCOUNTS(FSAS
Survey Summary/Conclusion
Looking ahead, employers will optimize their FSA programs to fit the
needs of their employees. More companies may now choose to participate and
receive payroll tax reductions if they know they will have greater employee
interest due to the new rollover option. Employee satisfaction with being able
to roll over $500 annually should grow with its adoption by employers.
We will continue to examine trends that emerge from 2015 and future
plan year program participation to gauge how the new rollover option also
affects companies’ benefits goals and employee healthcare savings behaviors.
Any changes that employees make to their administration and communication
strategies will shed light on workforce engagement with FSAs and the ongoing
success/adoption of these employee benefit programs.

9. 9
2014FLEXIBLESPENDINGACCOUNTS(FSAS
About the Healthcare
Trends Institute
The Healthcare Trends Institute is an educational platform to help
employers, third-party administrators, health plans, brokers, banks, payroll
providers, consumers, and other stakeholders keep up with the rapidly
changing healthcare benefits industry. It covers a range of topics related to the
administration and management of healthcare benefits. To ensure all content
and programs achieve the highest level of quality and relevancy, the Institute
is guided by an Editorial Advisory Board comprised of subject-matter experts
that represent diverse aspects and perspectives within the healthcare benefits
industry. More information is available at www.healthcaretrendsinstitute.org
Tiffany Wirth, Executive Director
Healthcare Trends Institute
4324 20th Avenue, SW, Ste. 200
Fargo, ND 58103
P 701.499.7215
E info@HealthcareTrendsInstitute.
org
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