Healthcare Flexible Spending Accounts $500 Carryover

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The U.S. Treasury recently announced that participants in Healthcare Flexible Spending Accounts would now be able to carry over $500 of unused funds into the next year, but only if your employer chooses to allow it. Employers can allow either a 2.5 month grace period after the end of the year or the $500 rollover, but not both. Or they could be punks and offer neither. This could start as early as this year for 2013 funds.

I like the proposal that these “use-it-or-lose-it” FSAs be simply rolled into Health Savings Accounts which are currently only available to those with high-deductible health plans. The infrastructure and administrators (bank and brokerage holding accounts) already exist, and that way people can simply set aside some tax-protected money for health care for an indefinite period without worrying about losing it. Don’t make people predict their own medical expenses, that’s the main reason we need insurance.

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  1. Hey Jonathan. I didn’t see any info in the articles that you linked indicating that unused FSA can be converted to HSAs. I don’t have access to HSAs and would contribute to my FSA if that were an option.

  2. As you point out, the infrastructure is already in place, so why not make Healthcare Spending Accounts available to everyone? These accounts could have a penalty of say, ten percent if the money was withdrawn for other than healthcare related use. So why don’t we have this option? The insurance companies might lose some revenue, but the financial sector would see an inflow of money. Very interesting question…

  3. @Wd – That was a proposed idea, it is currently not possible. Call your representatives!

    @mike s – I’m with you.

  4. I talked to our HR office about the new $500 option. They said we are going to stay with the grace period option. I do not blame them. We are going through enough changes with the Affordable Care Act.

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