11/02/2017

Unless your company’s plan document states otherwise, any funds remaining after all eligible reimbursements have been made is forfeit to the cafeteria plan; these funds are used to offset plan losses and expenses.

In order to prevent the loss of funds, it is important to plan carefully so that your annual election matches your actual expenses as closely as possible. Of course, it is impossible to project with 100% accuracy, so you may come up short or have a little money left at the end of the claim period.

However, it is important to realize that loss of funds does not necessarily indicate a loss out-of-pocket. In most cases, even when participants claim less than their election, they still save money by participating in the plan. For example, if your calculated annual tax savings is $1,200 (based on a $4,800 election) and you only use $4,600, you’ve still saved money – in this example, $1,000.