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What happens to the funds left in the Limited Purpose FSA at the end of the plan year?

Employers can decide on how excess funds are handled at the end of the plan year. They have a choice between: Forfeit: After any run-out period, the funds in the account will be forfeited by the employee back to the employer. The employer can use these funds to offset any expenses for having the FSA plan in place (i.e, monthly participant fees). Carryover: This option allows employees to carry over up to $500 of unused LPFSA funds to the following year. Employers can elect an amount less than $500 as the carryover maximum. Grace Period (2.5 Month Extension): This option allows employees an additional 2 and 1/2 months at the end of the regular plan year to incur expenses and submit them for reimbursement. *The IRS does not allow a LPFSA plan to have both the carryover and grace period.

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