Yes, it’s possible. A cafeteria plan may provide for an optional grace period of up to the 15th day of the third month immediately following the end of each plan year (i.e., March 15 for calendar year plans).

If a cafeteria plan provides for a grace period, an employee who has unused benefits or contributions relating to a qualified benefit (for example, health FSA or dependent care assistance) from the immediately preceding plan year, and who incurs expenses for that same qualified benefit during the grace period, may be paid or reimbursed for those expenses from the unused benefits or contributions as if the expenses had been incurred in the immediately preceding plan year.

Grace period requirements. If the grace period is added to a cafeteria plan through an amendment, all written plan requirements must be satisfied. A grace period also must satisfy the following requirements:

• the grace period provisions must apply uniformly to all participants in the cafeteria plan, determined as of the last day of the plan year. Participants in the cafeteria plan through COBRA and individuals who were participants as of the last day of the plan year but terminate during the grace period are participants for purposes of the grace period;
• the grace period provision must state that unused benefits or contributions relating to a particular qualified benefit may only be used to pay or reimburse expenses incurred with respect to the same qualified benefit; and
• the grace period provision must state that, to the extent any unused benefits or contributions from the immediately preceding plan year exceed the expenses for the qualified benefit incurred during the grace period, those remaining unused benefits or contributions may not be carried forward to any subsequent period (including any subsequent plan year), cannot be cashed out, and must be forfeited under the use-or-lose rule.

A grace period is available for all qualified benefits, but does not apply to paid time off or elective contributions under a Code Sec. 401(k) plan.

Source: CCH Employee Benefits Management