Although generally a highly rated and highly valued benefit, one of the most irksome realities of flexible spending accounts is that account holders must drain the funds at the end of every plan year or lose them altogether. However, a bipartisan Senate proposal aims to end the FSA “use it or lose it” rule.

Well, I guess the gridlocked way the debt ceiling talks are going, something ought to be bipartisan. Sheesh.

Late last week, Senators Ben Cardin (D-Md.) and Mike Enzi (R-Wyo.) introduced a bill that would allow consumers to pay taxes on and withdraw any remaining FSA funds.  The bill has support in the House as well, introduced  with bipartisan support this spring by Reps. Charles Boustany (R-La.) and John Larson (D-Conn.).

“It is time to modernize FSAs to eliminate this burdensome ‘use it or lose it’ rule,” Cardin said when he introduced the legislation. “It is both fair and sound health policy to allow FSA participates to cash-out remaining funds at the end of the plan year rather than forfeiting the balance to their employer.” 

Amen, I say.

“FSAs help millions of Americans manage and reduce their out-of-pocket health care costs,” said Joe Jackson, chairman of Save Flexible Spending Plans and CEO of benefits administration service provider WageWorks, Inc.  “However, the ‘use it or lose it’ rule creates an unnecessary risk for FSA participants and a deterrent for non-participants.  Changing this rule will ensure that participants don’t lose their hard-earned money if their out-of-pocket health care costs don’t match their prediction for the year.”

I repeat: Amen!

Cardin adds that since health care reform caps annual FSA contributions at $2,500 beginning in 2013, “the ‘use it or lose it’ rule [is] unnecessary.”

Ame- … Hey, now wait a minute. Not sure I agree with Cardin on that one, and know at least one benefits professional who doesn’t either.

In an either/or scenario, which FSA reality would you choose? Keeping “use it or lose it” and being able to set the cap as you see fit? Or, keeping the cap and letting account holders rollover funds from year-to-year? Share your thoughts in the comments.

Register or login for access to this item and much more

All Employee Benefit News content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access