; and (2) simplify and clarify the automatic escalation rules under sections 401(k)(13)(C)(iii) and 401(k)(14)(C) of the Internal Revenue Code of 1986 in the context of employers with multiple payroll and administrative systems. Such regulations or guidance shall address the particular case of employees within the same plan who are subject to different notice timing and different percentage requirements, and provide assistance for plan sponsors in managing such cases. 12. Limited transfer of unused balance in flexible spending arrangement (a) In general Section 125 of the Internal Revenue Code of 1986 is amended by redesignating subsections (k) and (l) as subsections (l) and (m), respectively, and by inserting after subsection (h) the following new subsection: (k) Special rule for unused benefits in flexible spending arrangements (1) In general For purposes of this title, a plan or other arrangement shall not fail to be treated as a cafeteria plan or flexible spending arrangement merely because such arrangement provides for qualified retirement distributions. (2) Qualified retirement distribution (A) In general For purposes of this section, the term qualified retirement distribution means any distribution to an individual of all or a portion of the employee’s account under such arrangement, but only to the extent— (i) the amount does not exceed the lesser of— (I) $250, or (II) the unused benefits with respect to the arrangement, and (ii) the amount received is paid in the form of a direct trustee-to-trustee transfer to a qualified retirement plan (as defined in section 4974(c)), or an eligible deferred compensation plan (as defined in section 457(b)) of an eligible employer described in section 457(e)(1)(A), maintained by the same employer as the employer maintaining the cafeteria plan or flexible spending arrangement of the individual. (B) Unused benefits For purposes of this paragraph, the term unused benefits means, with respect to an employee, the excess of— (i) the maximum amount of reimbursement allowable