Flexible Spending Accounts Face a Big Change in 2013

Kansas City, Kan.— Medical costs are continuing to soar, leaving many Americans clambering to find a way to alleviate some of the burden of expensive medical care, particularly procedures insurance doesn’t fully cover. Many employers are providing assistance by offering flexible benefit programs, such as flexible spending accounts to their employees as a part of their benefit plan. The Benefits USA 2012/2013 survey results found 89.7 percent of companies offer a flexible spending account to their employees, with 23.6 percent of employees at these organizations enrolling in them.

Flexible spending accounts allow employees to set aside pre-tax dollars from their paycheck for use in covering various medical and dependent care expenses. Qualified expenses include everything from contacts and eyeglasses, insurance deductibles and co-payments, prescription medications and even tuition for children attending special needs schools. Currently there is no federally mandated limit on the amount that can be contributed to an FSA although one may be imposed by the employer, and any unused balances are forfeited each year.

Beginning in 2013, however, with the implementation of a major provision of the Patient Protection and Affordable Care Act, flexible spending accounts will have a mandatory contribution limit of $2,500 per year. This change is causing a lot of controversy as it’s expected to increase the tax burden for those using FSA accounts to pay high ticket expenses such as orthodontia or special needs tuition bills.

“Flexible Spending Accounts already caused a stir last year when provisions of the healthcare law went into effect disallowing individuals to use FSA distributions for over-the-counter drugs, without a prescription,” said Amy Kaminski, vice president for Compdata Surveys. “It will be interesting to see how employee enrollment rates to FSAs are influenced over the next year once the contribution limit goes into effect.”

About the Survey
Benefits USA 2012/2013 analyzes national and regional data on benefits eligibility and administration policies with detailed information on benefit plans, premiums and provisions. Information was collected from more than 4,500 benefit plans covering over 13 million employees across the country.

Compdata Surveys has been providing comprehensive data at affordable prices to organizations from coast to coast since 1988 and is the nation’s leading compensation and benefits survey data provider. Thousands of organizations provide data in each of our eight industry specific surveys each year, ensuring the reliability of our results. For more information about the compensation and benefits surveys, contact Michelle Willis at (800) 300-9570.