FSAs Under Fire

One of the changes under the proposed health care reforms is to reduce the amount of money that workers can contribute to a flexible spending account (FSA). Currently, with an FSA, an employee can deposit a certain amount of money each year--the amount depends on whether the coverage is individual or family--out of pre-tax dollars and use that money throughout the year to pay for out-of-pocket medical expenses, such as deductibles, co-pays, OTC medications, and other costs not covered by health insurance.

It's been proposed to lower the amount of money that workers can contribute to their FSAs. What's the big deal? Well, if FSA contributions are capped at a lower rate, then people will will not be able to set aside as many pre-tax dollars for medical expenses, which means their taxable income will be higher. Right now, FSAs help American workers save up to 25% on payroll taxes on every medical expense, but the proposed caps will reduce that tax savings.

Save My Flex Plan provides a great deal of information about how this change will affect the hundreds of thousands of workers who contribute to FSAs. I encourage you to read more about this issue and write to your Congressional representatives to ask them to oppose these FSA caps.