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<nobr>Aug 4, 2005</nobr>

ERIC and Deloitte Receive Results of Flexible Spending Arrangement Survey

Washington, D.C., August 4, 2005 – The ERISA Industry Committee (ERIC) and Deloitte & Touche USA LLP have announced results of their Flexible Spending Arrangement (FSA) survey of 318 employers from the private and government sectors.

According to the survey, 34 percent of surveyed employers plan to give participants in their health and dependent care FSAs the newly permissible 2.5-month grace period to spend unused balances, while 16 percent plan to offer the grace period to participants in health FSAs only. Seventy-percent said they would not offer the grace period to dependent care FSA participants because they felt dependent care expenses are more predictable than health care expenses, so a grace period to avoid forfeitures was unnecessary.

The Department of Treasury and the Internal Revenue Service recently issued guidance providing some relief from the “use-it-or-lose-it” rule, which requires employees enrolled in health or dependent care FSAs to forfeit any money remaining in their FSA accounts at the end of the plan year. The amended guidelines allow -- but do not require -- employers to alter their Internal Revenue Code Section 125 cafeteria plans, permitting health and dependent care FSA enrollees a maximum 2.5-month grace period to incur eligible expenses that can be paid from the previous year’s salary reduction contributions.

The survey results also show that eighty-eight percent of those surveyed said they would allow the maximum 2.5-month grace period for their health and dependent care FSA participants. In addition, the majority of those surveyed said they would make the grace period available to both FSA plans effective this year.

“I suspect many of the employers not offering the grace period are taking a ‘wait-and-see’ approach,” stated ERIC President Mark J. Ugoretz. “Because it’s so new, employers may want to gauge FSA plan participants’ reactions to not having the grace period, or will wait for more guidance from the Treasury Department.”

For employers not offering the allowable grace period to either health or dependent care FSA participants, 67 percent said they were concerned about tracking account balances for two separate plan years; 58 percent said it was too difficult to coordinate grace period with run-out period (the period immediately following the plan year participants can file claims for eligible expenses incurred during the plan year); 49 percent said forfeitures have not been a significant problem for health or dependent care plan participants; and 47 percent had concerns about tax and Form W-2 reporting requirements.

The survey was conducted July 18 through July 26, 2005.


ERIC is a non-profit association committed to and represents exclusively the advancement of the employee retirement, health, and compensation plans of America’s largest employers. ERIC’s members provide benchmark retirement, health care coverage, compensation and other economic security benefits directly to tens of millions of active and retired workers and their families. ERIC has a strong interest in proposals affecting its members’ ability to deliver those benefits, their cost and their effectiveness, as well as the role of those benefits in the American economy.

Deloitte refers to one or more of Deloitte Touche Tohmatsu, a Swiss Verein, its member firms and their respective subsidiaries and affiliates. As a Swiss Verein (association), neither Deloitte Touche Tohmatsu nor any of its member firms has any liability for each other’s acts or omissions. Each of the member firms is a separate and independent legal entity operating under the names “Deloitte,” “Deloitte & Touche,” “Deloitte Touche Tohmatsu” or other related names. Services are provided by the member firms or their subsidiaries or affiliates and not by the Deloitte Touche Tohmatsu Verein.
Deloitte & Touche USA LLP is the US member firm of Deloitte Touche Tohmatsu. In the US, services are provided by the subsidiaries of Deloitte & Touche USA LLP (Deloitte & Touche LLP, Deloitte Consulting LLP, Deloitte Financial Advisory Services LLP, Deloitte Tax LLP and their subsidiaries), and not by Deloitte & Touche USA LLP

For additional information please contact:

Brendan LaCivita, Director of Communications

Text Files:

FSA Survey Results

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