Marketplace Scratch Pad

Use it or lose it

Scott Jagow Dec 31, 2009

If you have a flexible spending account for health care, today may be the last day to spend the money or watch it disappear. And in fact, 2010 might be about the last year for FSAs period — or at least in their current form.

Under both health care reform bills in Congress, the cap on FSA contributions would drop from about $4,500 to $2,500. Plus, under the House bill, you won’t be able to stock up on cold medication anymore. More from the New York Times:

In terms of differences between the bills, under the House bill, consumers can’t use these accounts to pay for over-the-counter medications, while under the Senate bill, consumers can use the accounts to pay for such medications if they get a prescription from their doctor. In addition, under the Senate bill, FSAs will be included in calculating the taxes insurers (and ultimately companies and individuals) will be hit with if they offer more generous plans, which could further encourage employers to drop such plans.

So, for some people, FSAs could go away altogether. And yes, you read that correctly. In the Senate version, you’d need a doctor’s note to get reimbursed for over-the-counter cold meds. In the House, no OTC whatsoever, except insulin.

As it stands now, you can use your FSA to buy over-the-counter stuff, and a lot of people with a balance rush out to the drug store at the end of the year. They grab some Tylenol, purchase an at-home test or a blood pressure monitor or even buy a lift chair/recliner (you might need a doctor’s note for that one.)

The drug stores are all over this. I have a balance on my FSA because I spent a lot less than anticipated on a maintenance drug (they came out with a generic). So I’ve been looking around. Walgreens and CVS are both offering $10 off online orders of $50 or more. Just look for the FSA symbol! Our New York bureau chief Amy Scott says she bought a pair of prescription sunglasses with her FSA balance. The eyeglass places get quite busy the last week of the year because of this. She’s doing a story for tonight’s show.

Now, if you don’t use the tax-free money by the deadline, your employer gets to keep it. Supposedly, this balances out the people who use their entire FSA, let’s say in six months and then leave the company. But I’m surprised the government doesn’t take it. It is tax-free money that people are socking away from their paychecks. I know I’d love to put the leftover toward my tax bill. The IRS does allow companies to tack on a two-and-a-half month grace period for their employees if they so chose or to roll the money over into next year’s FSA. But I don’t know how many companies do that.

There’s at least one effort to save FSAs. You can see the spokeswoman below. She doesn’t say this in the video, but she’s the chief compliance officer for – you got it – a health benefits company that specializes in things like flexible spending accounts. It’s called WageWorks.

You have an FSA? You like them or think they promote wasteful spending?

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