Q: I have to decide how much to contribute to my flexible spending account for next year. What's the maximum I can contribute to my FSA in 2014?

A: Flexible spending accounts, which allow you to pay medical bills with pretax money, limit employee annual contributions to no more than $2,500 per person per year; until 2013, you were permitted to put away a maximum of $3,000 or $4,000. Now, the feds have made another big change to flexible spending accounts. The Treasury Department and the IRS recently changed the rules so that employers may allow people to carry over up to $500 in their accounts from one year to the next. Employers can choose to make this change before the end of 2013, but they aren't required to offer the carryover.

In the past, you would lose any money in the account that you hadn't used by December 31 (or March 15 of the following year, if your employer offered a grace period). This use-it-or-lose-it provision scared off some people from participating in FSAs and prompted some people who did have accounts to make year-end dental or eye doctor appointments they didn't really need.

Employers may continue to offer the March 15 grace period instead or offer neither option -- but they can't offer both the $500 carryover and the March 15 grace period.

Joe Jackson, CEO of WageWorks, which administers FSAs for employers, expects that many employers who don't currently offer grace periods will adopt the $500 carryover right away. But, he says, employers currently offering grace periods are likely to wait until 2014 to switch to the carryover because making the change in time for 2013 would be too difficult. That is, they would have to amend the plan before the end of the year and provide sufficient notice, and there may not be enough time given the legal requirements, says Steve Wojcik, vice-president of Public Policy for the National Business Group on Health, a health benefits organization of large employers.

(Kimberly Lankford is a contributing editor to Kiplinger's Personal Finance magazine and the author of Ask Kim for Money Smart Solutions (Kaplan, $18.95). Send your questions and comments to moneypower@kiplinger.com. And for more on this and similar money topics, visit Kiplinger.com.)

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