IRS gives guidance allowing health FSA cashouts for employees called to military duty

Employers that want to allow health FSA cashouts by employees ordered to military service have new IRS guidance to follow. Though health FSA rules generally permit distributions only for qualified medical expenses, the HEART Act lets employers make an exception for employees called to active duty. The exception may mitigate the impact of the FSA "use or lose" rule on active-duty reservists with military health coverage. Notice 2008-82 explains how employers permitting these cashouts can determine eligibility, process requests, calculate and pay taxable distributions, and amend plan documents.  (Select News, 2 Oct 2008)

• Full text of Notice 2008-82 (IRS, 30 Sep 2008)

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