Written by Jenn Paton, Senior Account Manager
Have you considered the impact that the new FSA limit for medical expenses will bring on January 1, 2013? 2013 is just around the corner when you think about all of the changes per Healthcare Reform (ACA). As you may know, FSA contributions will be limited to $2,500 per year. Currently, there is no limit and employers are able to set their own limits internally. Many of the benefits clients that I work with limit their FSA medical accounts to approximately $5,000.
Flexible Spending Accounts Defined
Flexible Spending Accounts (FSA) are tax-advantaged financial accounts that can be set up through your employer. An FSA allows an employee to set aside a portion of earnings to pay for qualified expenses as established in benefits plan, most commonly for medical expenses but often for dependent care or other expenses. (Source Wikipedia)
Use It or Lose It
Since this is a ‘use it or lose it’ benefit, many employees tend to be conservative when they first enroll in a medical FSA. However; over time, they realize what a tremendous benefit it is to be able to set aside pre-tax dollars for major medical, pharmacy, dental, and vision expenses over the course of the year. Do you have children?
Pre-Tax Benefit Example
To give you an example, an employee may know in advance that their dependent child may need braces which can be a significant expense – well over $5,000. If the employer can’t offer a medical FSA over $2,500, then the employee has no way to reap the benefit of the tax savings.
- How will this new mandate affect you and your company?