Aug 10

Written by: Besselman and Little
8/10/2011 10:53 AM 

A new bill introduced in the Senate last week could help consumers keep their employer-sponsored flexible spending account funds at the end of the year.  Sens. Ben Cardin (D-Md.) and Mike Enzi (R-Wyo.) introduced the Medical Flexible Spending Account Improvement Act, S. 1404, that would allow consumers to pay taxes on and withdraw their remaining funds from their FSAs.

During his introduction of the bill, Sen. Cardin said, "It is time to modernize FSAs to eliminate this burdensome 'use it or lose it' rule.  It is both fair and sound health policy to allow FSA participants to cash-out remaining funds at the end of the plan year rather than forfeiting the balance to their employer."

"FSAs help millions of Americans manage and reduce their out-of-pocket health care costs," said Joe Jackson, chairman of Save Flexible Spending Plans and CEO of WageWorks, Inc.  "However, the 'use it or lose it' rule creates an unnecessary risk for FSA participants and a deterrent for non-participants.  Changing this rule will ensure that participants don't lose their hard-earned money if their out-of-pocket health care costs don't match their prediction for the year."

In addition, the bill's sponsors noted that the original reason for adopting the "use it or lose it" provision is no longer relevant.  The IRS adopted the provision to prevent FSAs from being misused as tax shelters.  But according to Sen. Cardin, "with the enactment of the Patient Protection and Affordable Care Act in 2010, annual contributions to FSAs will be capped at $2,500 beginning in 2013, which makes the 'use it or lose it' rule unnecessary."

Save Flexible Spending Plans, an advocacy group that hopes to make FSAs more accessible to consumers, commended Sens. Cardin and Enzi for their introduction of the bill.

Source: www.news.yahoo.com