Flexible Spending Accounts: New $2,500 maximum hurts autism families

As any parent of a child with autism knows, it is EXPENSIVE. I love(d) the Flex Savings Account offered by my company. The idea is that you can set aside a certain amount of PRE-TAX dollars to use to pay for various healthcare expenses. At my company, it was $5,000 this year. This means my taxable income is reduced by $5,000. Another great part of the plan is that, while my contribution is taken out bi-weekly, I get the full amount to spend on Jan 1. The plan is “use it or lose.” If I put in $5,000 and don’t use all of it, I lose it. Fine, it’s not really hard for families with autism to rack up $5,000 in co-pays, prescriptions, etc. Given the new $2,500 max, some are questioning the “use it or lose it” part of the law.  (read more on FSAs @ Wikipedia … http://en.wikipedia.org/wiki/Flexible_spending_account)

In light of the new $2,500 cap on healthcare flexible spending accounts under ObamaCare, the Internal Revenue Service is asking taxpayers: Do we need the use-it-or-lose-it rule? It might sound arcane, but it can mean hundreds of dollars extra in your pocket each year.

Some 33 million workers divert pre-tax salary into these accounts to cover out-of-pocket healthcare expenses like co-pays, deductibles, and orthodontia. But millions of folks don’t take advantage of these plans because of the dreaded “use-it-or-lose it” rule: Dollars left in the account at the end of the plan year are forfeited. Others rush and make unnecessary expenditures at year end trying to run down their balances, and those who forfeit money because they miscalculated projected expenses are left seething.

“Many middle class Americans are foregoing this benefit because they aren’t able to accurately predict their health care expenses,” says Natasha Rankin, executive director of the Employers Council On Flexible Compensation, which has long supported efforts to eliminate the use-it-or-lose-it rule.

FSAs were invented by Congress in 1978, and the use-it-or-lose-it rule dates to proposed regulations issued in 1984 sparked by a concern about excessive compensation deferral. Why the new interest in modifying the rule? Under the Affordable Care Act, aka ObamaCare, starting Jan. 1, 2013, there will be a new $2,500 annual salary-deferral limit for healthcare FSAs. Currently, there is no legal limit, and 78% of large employers set it at $5,000 or higher, according to AON Hewitt. The $2,500 cap was a revenue raiser estimated at $14.6 billion over 10 years. The thinking is that with the cap, there is no need for the use-it-or-lose-it rule.  – http://www.forbes.com/sites/ashleaebeling/2012/06/19/obamacare-calls-flexible-spending-account-use-it-or-lose-it-rule-into-question/

So, while I do like some aspects of the new healthcare law, like the pre-existing conditions and keeping your kid on your insurance longer, this new max on flex spending is not one of them.   This change will cost my family several hundred dollars than could have been put to better use than donating to Uncle Sam.

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