Flexible spending accounts have always been an attractive option for those on employer-sponsored health plans. But one provision has traditionally soured the deal for some.

FSA “use-it-or-lose-it” rules have required enrollees to use all of the tax-free money they put into FSAs by the end of the year (sometimes with a grace period), or they lose the money. Many unnecessary pairs of glasses have been bought as consumers try to get something of value with their lingering account balances.

But “use-it-or-lose it” has changed. In 2013, the Treasury Department amended the FSA rules, allowing consumers to roll over $500 from one year to the next. With an estimated 35 million Americans using FSAs, the new rule could have a huge impact.

“That's a substantial change,” says Bruce Elliott, manager of compensation and benefits for the Society for Human Resource Management, adding that the rollover provision could change FSA participation in two ways.

“I think we're going to see higher levels of participation [in FSAs] and higher levels of elections—where the employee will contribute the maximum or close to the maximum level,” he says.

The change was greeted enthusiastically by employers and third-party-administrators, which help companies oversee health plan offerings such as FSAs. WageWorks, a San Mateo, California-based company that specializes in administrating consumer-directed benefits, praised the move, saying it will help eliminate wasteful spending by employees trying to use up FSA dollars at the end of the year.

According to Laurie Lemay, chief relations officer for HRC Total Solutions, a Manchester, New Hampshire-based TPA, benefits groups have been asking regulators to change the “use-it-or-lose-it” rule for years. She says the new rollover provision will bring more people to the FSA model.

“We expect it to have a positive impact,” she says. “A lot of employers have decided to adopt it.”

Businesses should note the change is not automatic; companies still have to choose whether to offer the new rollover provision, and they will need to inform employees if they make the change.

A popular benefit, but…

A 2014 survey showed Elliot's group that 68 percent of businesses offered medical FSAs.

Even with that relatively high take-up rate, some have been wary of FSAs. The “use-it-or-lose-it” provision has been cited repeatedly as a disincentive to participate in the accounts. Health care costs can be hard to predict precisely, and consumers feared ending the year with significant amounts of money sitting still unspent in the accounts. Even with some companies offering grace periods—for example allowing employees to use their FSA account funds through March of the next year—the prospect of forfeiting dollars at the end of the year was troubling to some.

“One of the main things that people cite in surveys about FSAs is that they fear losing their money,” says Jeremy Miller, FSA Store.com founder and president.

Miller's company works with TPAs such as HRC Total Solutions, and provides an Amazon.com-type retail website for FSA accountholders. The site provides tools and education about spending accounts, along with a wide range of health care products.

Miller says the lack of a rollover feature in plans with FSA might have played a role in the rising popularity of health savings accounts. Although the latter have high deductibles, their funds are portable (an enrollee can keep the account if their employment status changes) and the funds roll over from year to year.