Bill would end FSA 'use it or lose it' provision

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A bill in the House of Representatives would give consumers who have flexible spending accounts more leeway in how to use the funds, reports Healthcare Finance News.

The bill, known as the Medical Flexible Spending Account Act, is intended to encourage more use of FSAs, which have had a smaller than forecast takeup rate since their introduction in the 1970s. It also aims to give relief to the roughly 25 percent of FSA users who wind up forfeiting funds in the accounts at the end of each calendar year. It is sponsored by Rep. Charles Boustany (R-La.) and John Larson, (D-Conn.).

Currently, FSA account holders are required to forefeit any funds in their account set aside for medical expenses at the end of each calendar year. The bill would allow anyone with an FSA to withdraw any funds not used to pay for medical expenses. The withdrawn sum would become taxable.

"Over 85 percent of large employers offer FSAs but only 20 (percent to) 22 percent of eligible employees enroll," said Boustany and Larson in a letter to Congress explaining the bill. "The principal reason for not enrolling or for underfunding accounts is fear of the 'use-or-lose' provision."

The Affordable Care Act puts a $2,500 limit on annual FSA contributions starting in 2013.

For more:
- read the Healthcare Finance News article
- read the State Column article

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