What allows employers to handle forfeited funds from an FSA?

Employers have specific guidelines that govern the handling of forfeited funds from a Flexible Spending Account (FSA). The correct choice indicates that forfeited funds can be utilized to cover plan administrative expenses. When employees fail to use the full amount they elected for their FSA within the plan year, the unspent amounts are considered forfeited.

Instead of reverting directly to employees, the plan often allows employers to allocate these funds for costs associated with administering the plan. This includes expenses such as record-keeping, claims processing, and other necessary operational elements that facilitate the overall functioning of the FSA.

The other options present limitations or requirements that do not accurately reflect the regulations governing FSA funds. Refunds or retention rules are not universally applicable; rather, the use of forfeited funds for plan-related expenses provides a practical means for employers to manage and sustain the FSA program effectively. This functional approach ensures that both the plan and its participants are supported without necessitating direct refund policies or charitable distributions.