To amend the Internal Revenue Code of 1986 to allow up to $500 of health benefits and dependent care assistance in flexible spending accounts and similar arrangements to be carried forward to the succeeding taxable year or to be included in gross income upon termination of such accounts and arrangements.

Amends the Internal Revenue Code to permit a taxpayer-participant of a flexible spending or cafeteria plan with up to $500 in unused health or dependent care benefits to: (1) carry such amount forward to the next year; or (2) include such amount in gross income in the case of plan termination or failure to re-enroll.

States that the availability of such election shall not cause: (1) a plan to not be considered a flexible spending or cafeteria plan; (2) the inclusion in gross income of an otherwise excluded amount.