Now that FSAs are limited to $2500, the Use or Lose has been modified. This may entice those worried about ‘losing’ a bit more likely to sign up.
FSA participants are now allowed to carry over $500 to use in the following plan year. This provides an alternative to the current “grace period” rule, which means you can’t have both a grace period and the carry over.
So now it’s grace period or carry over. Much better than use or lose.
For more information see IRS Notice 2013-71.