Rollover from FSA to HSA

[MARYMM]

I've just read IRS Notice 2007-22 on this topic and still have a question on this.

Under the special transitional relief rules, if we want to allow the rollover of 2006 FSA balances, we need to amend our FSA Plan by 3/15/07. The examples given all assume that the FSA has a grace period - which ours does not. Does the FSA have to have a grace period in order for the participants to be allowed to do the one-time rollover ?

[Guest chloe]

That's the way we and our tax counsel are interpreting it. If the FSA does not have a grace period, the rollover is not permitted because of the use-it-or-lose-it rule. Doesn't seem to be what was intended by the law, but that's the guidance from Treasury.