FSAs may Drop the “Use-it-or-Lose-It” Rule

The Treasury Department is seeking comments on whether it should eliminate or modify a rule that requires U.S. residents to use all the money in their tax-free health flexible spending accounts or forfeit the balance to their employer, National Journal reports.

Don’t tarry. Deadline is Friday. There is no reason workers should be forced to spend their Flexible Spending Account (FSA) funds in December on unnecessary purchases like prescription sunglasses rather than forfeit the money. With a tax free rollover, 35 million people would be added to the 27 million or so who already have a “use-it-or-save-it account” (Health Savings Accounts and Health Reimbursement Arrangements). So this could have a huge impact on health care markets.

Two unresolved problems: Would people be able to withdraw unused funds, pay taxes and spend the money non-health consumption? They should. Another restriction that needs to go is the rule that an unused balance in an employer FSA account precludes obtaining a Health Savings Account (HSA) because HSAs cannot coexist with other types of coverage that provide for first-dollar benefits.

HT: American Healthline.

Comments (5)

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  1. Devon Herrick says:

    This is a great idea — it should have been done years ago! There’s no reason people should have to rush to spend unused FDA funds on non-essential medical care when everybody will someday experience a need for more health care spending.

    Future provisions that allow FSA rollover should address the problem of how unused FSA funds can co-exist with an HSA. The Treasury should allow unused HSA funds to be rolled over into an HSA or cashed out net of taxes.

  2. Joe S. says:

    It’ s surprising that the Obama Treasury is doing this, when the Bush Treasury wouldn’t.

  3. Chuck says:

    Being able to rollover money in your own FSA, seems like common sense!

  4. Paul H. says:

    Let’s hope they show some sense.

  5. Lisa says:

    This is none of their business and should encourage people use it as healthcare savings account year after year which in turn would help cut costs to insurance companies. If you had funds available in an account for health care you likely would consider paying “cash” for certain procedures.