FSA changes on the horizon?

dbutton111 · June 2004

The below was posted recently on the Florida Employer's Association website. Has anyone else heard this? This appears to completely dislodge the former views that there were risks for both employers and employees with FSA accounts. It has no mention that employer's can get back money paid out of the plan prior to employee's contributions, leading me to believe that all risk would fall on employer's shoulders. If this passes then employees can carry over unused funds, but if they spend it early in the year and then terminate employment, too bad for the employer.

"FSA-to-HSA Bill Passes House - Owners of health care flexible spending accounts (FSAs) would be allowed to carryover at the end of the calendar year up to $500 in unused funds or move them into tax-favored health savings accounts (HSAs), under legislation (H.R. 4279) approved 273-152 by the House May 12. Proponents of the legislation said it would bolster newly created HSAs while ending the current “use-it-or-lose-it” requirement applying to FSAs that causes a rush by workers to spend unused FSA dollars by the end of the calendar year. Opponents expressed fears that HSAs could create adverse risk selection in insurance markets while providing a tax shelter for wealthy Americans. Source: Bulletin to Management, 05/20/04"

Don D · June 2004

I've always thought employees should not suffer the 'use it or lose it' scenario. But, it has two faces. On one hand the change would, as the article mentions, not cause a rush by employees to seek unneeded medical attention, tests, dental visits, whatever, at year's end. But then it would also have the impact of 'teaching' employees that they need not be critical, careful planners when they set amounts up.

And it's always been true that the ee can spend it all up in January, not yet having put it in the account through payroll deduction, leave the company, and never have to pay it back. That part would impose the same amount of potential risk for the employer.

dbutton111 · June 2004

Right Don, so if this changes the employer is at greater risk then the employee. Employees can roll their $$s over so they have little risk unless they are contributing a large amount. Before, the risk was about 50/50. Employees could spend it all and terminate leaving the employer on the hook (and I've known MANY employees who planned this - knew they were going to another job the next year and signed up for a max health care FSA then went and got Lasix on 1/2, spent it all, turned in their notice 1/3 and nothing the employer could do). At least with the forfeiture at the end of the year there was risk to the employee to spend it all. Quite honestly I've left about half on the table the last two years because I ran out of time before I could schedule any more appointments.

And I don't think forcing employees to do some of the maintenance type medical procedures (eye exams, buying extra contacts, dental exams, etc) is a bad thing. If more people did routine exams and procedures our health insurance costs would go down in the long run.

hahaha

jmcaa · June 2004

I remember hearing about this as proposed legislation. Don't know if it is final yet though.

dbutton111 · June 2004

Right, it is still proposed. It's only passed the house so far.

MrCreosote · June 2004

It's stuck in the Senate. If they make the tax benefit more attractive, more people will use it. If more people use it, the govt will get less tax income. If they get less tax income, they will have to increase some other tax in order to make up for the shortfall. Senators do not want to find themselves in a position requiring them to suggest any kind of new tax or tax increase. Around we go.

FSA changes on the horizon?

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