Hello all,
I work for the largest third party administrator of Flexible Spending accounts, health savings accounts and pretax commuter and dependent care accounts for 100s of companies. Apparently the government is tossing around the idea of getting rid of these pretax accounts (the Flexible Spending Acct and the Health Savings Account) as a way to raise money to pay for the health care bill, which would probably mean I would lose my job.
Here is some information on it:
A Website that talks about it
The Joint Committee on Taxation told Senate leaders recently they could collect $68.6 billion over 10 years by abolishing the accounts, along with separate ones in which employers contribute money for workers to use for health care expenses. Eliminating both types of accounts would pay for four percent or more of the estimated $1 trillion to $1.5 trillion cost of expanding coverage to the 46 million uninsured.
The search for revenue is renewing debate over FSAs, long controversial in some health policy circles. Critics say the accounts are a tax shelter for the affluent that encourages spending on unnecessary tests or frivolous items, such as an extra pair of glasses. Proponents say FSAs help people pay for high medical expenses that aren’t covered by insurance.
Complicating the debate: The government doesn’t track even basic details on how the accounts are used, how much money is involved and what happens to the unspent funds. The only data available come from the industry—the companies that administer the programs for employers. Even that information is incomplete. Industry executives visited Capitol Hill this week to argue on behalf of the plans.
"We’re very concerned there are misconceptions out there," says Jody Dietel, an executive with WageWorks, a San Mateo, Calif., company that administers accounts for more than one million people. "There’s this wild notion that people are using it for really off-the-wall treatments and that’s not what we’re seeing."
It’s not clear how much FSA money is left on the table each year. Mercer, a consulting firm, says its survey of employers last year found that the average employee forfeited 4 percent of the money put aside in 2008, while Aetna Inc. says that workers in the plans it administers failed to spend 14 percent of their accounts in 2007.
Also unclear is what happens to the forfeited money. The IRS doesn’t tell employers what to do with it, aside from barring them from returning it to the workers who contributed it. Many companies use the leftover money to pay the fees charged by the corporations that administer the accounts, says John Hickman, who heads the health benefits practice at the law firm Alston & Bird. He says administrative fees usually range from $4 to $10 per month per participating employee.
Companies also are permitted to use the leftover money to cover losses incurred when workers spend all the money designated for their accounts early in a year but quit before they have fully paid into the accounts. (Under IRS rules, employers take the same amount of money out of each paycheck.)
A recent proposal from the Senate Committee on Finance recommends eliminating flexible spending accounts (FSAs) as an option to help fund a small portion of the costs for health care reform efforts. If this proposal is enacted, millions of hardworking Americans who rely on FSAs to manage and pay for their health care costs not covered by insurance would see an increase in their taxes at a time when many can least afford it.
I will straight up say that my company is obviously lobbying Congress about this but I thought people here in Kosland should know. There are millions of Americans that use these plans and since no one is quite sure how all this coverage is going to happen to take away these plans from people seems a little ridiculous. Especially since the new health care plan would not even be up and running until 2013 at the earliest. If we were going straight into single payer I would be less concerned on one level, it would suck to have to find a job but at least I would be covered. However with the conversations of mandates, higher taxes on dental insurance etc. I am not sure that the people will be fully covered, so these accounts would still be of some use.
Some more information
The Dems added this:
In addition, they added a measure that makes the cost of over-the-counter drugs ineligible for reimbursement under flexible spending accounts or health reimbursement arrangements. Democrats said that was consistent with the fact that over-the-counter medications aren't deductible as an itemized medical expense. The change raises $8 billion over 10 years.
Republicans said that would negatively impact more than 35 million Americans that are enrolled in flexible spending plans.
For many people that is one of the main things they use these accounts for, especially people with kids. Bandaids, aspirin, allergy medications, gauze, alcohol for wound cleaning, contact lens cleaning solution are all eligible, to make these not eligible would seriously affect a lot of people.
I know there was discussions on raising taxes on the wealthy, and Reps and Blue Dog Dems shot that down so now they want to make the money back by taking away pretax benefits from the middle and lower classes that use these accounts.
It was just something I thought you all should be aware of.
For a list of eligible expenses FSAs cover see
Here
Some information on FSAs, HSAs and Dependent care accounts:
FSA = A pretax benefit where you elect a certain amount (employers usually max this out at $5000.) to be deducted pretax from your payroll check. Your employer prefunds the account so your entire election is available at the beginning of the plan year. ANY medically needed expense is eligible which includes, vision, dental, OTC drugs, medications, bandaids etc. Some expenses like nutritional supplements or massage may also be eligible IF you have a medical need requiring those things ie iron for an anemic or massage for chronic neck or back pain. You do have to supply a letter from a licensed doctor describing the condition and why you need those things. If you do not use your entire election by the end of the plan year, the money goes back to your employer to pay takes on it.
HSA = You can set aside $5000.00 every year in a saving account for health care expenses. I am not an expert in these as I am not in that dept but they are a lot less restrictive because the employer is not prefunding this and you can actually invest this money once yoyu have over $1000.00 in the account. You never lose this money and I believe the HSA stays with you even when you change employers.
Dependent Care FSA = $5000.00 limit to help pay for child care expenses, summer day camps etc while you are at work. These are not pre funded so the money is available as you get paid and the funds will go back to the employer if you do not use all of them.
There were a lot of questions in the comments so I thought I would clear this up.