FSAs Face Big Change In 2013


Medical costs continue to rise, leaving many Americans trying to find a way to alleviate some of the burden of medical care, particularly procedures insurance does not fully cover. Many employers are providing assistance by offering flexible benefit programs, such as flexible spending accounts (FSA), to their employees as a part of their benefit plan. The Benefits USA 2012/2013 survey found 89.7 percent of companies offer an FSA to their employees, with 23.6 percent of employees at these organizations enrolling in them.

FSAs allow employees to set aside pre-tax dollars from their paycheck for use in covering various medical and dependent care expenses. Qualified expenses include everything from contacts and eyeglasses, insurance deductibles and copayments, prescription medications, and tuition for children attending special needs schools. Currently there is no federally mandated limit on the amount that can be contributed to an FSA although one may be imposed by the employer, and any unused balances are forfeited each year.

Beginning in 2013, however, with the implementation of a major provision of the Patient Protection and Affordable Care Act, flexible spending accounts will have a mandatory contribution limit of $2,500 per year. This change is causing a lot of controversy as it is expected to increase the tax burden for those using FSA accounts to pay high ticket expenses such as orthodontia or special needs tuition bills.

“FSAs already caused a stir last year when provisions of the health care law went into effect disallowing individuals to use FSA distributions for over-the-counter drugs, without a prescription,” said Amy Kaminski, vice president for Compdata Surveys. “It will be interesting to see how employee enrollment rates to FSAs are influenced over the next year once the contribution limit goes into effect.”

Benefits USA 2012/2013 analyzed national and regional data on benefits eligibility and administration policies with detailed information on benefit plans, premiums and provisions. Information was collected from more than 4,500 benefit plans covering over 13 million employees across the country. For more information, visit http://www.compdatasurveys.com.

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