Flexible spending accounts have long been a favorite tool among working Americans to help budget for out-of-pocket costs, but new research suggests health care FSAs could be an unintended casualty of health care reform. And the only way to keep them from running out of gas would be if they’re exempted from the Cadillac tax or the tax is completely repealed.
FSA balances are counted as an employer-paid premium toward the 40% excise tax calculation on high-cost employer-provided health plans. The Cadillac tax could affect 25% of U.S. employers when it takes effect in 2018, according to a Kaiser Family Foundation analysis. KFF predicts that as many as 42% of all employers could be affected by 2028 as they seek to reduce their exposure to the tax.
