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A Proposed $500 Bonus
[By Children’s Home Society of Florida Foundation]
House Ways and Means Committee Chair, Dave Camp, recently proposed an amendment on May 30 2012 that would permit new pliability for flexible health spending accounts. His amendment to the Health Flexible Spending Arrangements Improvement Act of 2012 permits employees who have a balance of up to $500 at the end of a year to receive a taxable payment of that amount.
Current Rules
Under current rules, employees are permitted to use salary reductions to allocate funds to a healthcare flexible spending account. The funds in the account may then be used for payment of qualified healthcare expenses.
However, the funds allocated to the account are forfeited back to the employer at the end of the year. Therefore, the accounts are frequently described as a “use it or lose it” plan.
Oversight Committee
Ways and Means Oversight Subcommittee Chair, Charles Boustany, Jr. (R-LA), proposed that the unspent money could be distributed to the employee as taxable income at the end of the year. Chairman Camp would permit the distribution, but only up to a maximum of $500.
Assessment
The proposed change in flexible spending accounts will cost the government about $4 billion over the next 10 years according to the Congressional Joint Committee on Taxation.
And so, as more and more medical professionals become employees, FSA rules should be monitored closely by doctors and their FAs.
Editor’s Note: If the House passes this change, the Senate would also need to take action. With the fall elections growing closer, it is becoming progressively more difficult to move forward on additional tax bills. If the change does not pass this year, it could quite possibly be included in the anticipated major tax reform expected for 2013.
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Filed under: Career Development, Health Law & Policy, Retirement and Benefits, Taxation | Tagged: Charles Boustany, Congressional Joint Committee on Taxation., Dave Camp, Flexible Spending Accounts, FSAs, House Ways and Means Committee Chair, Update on Flexible Spending Accounts |
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FSA Update
Thanks to a change from the Affordable Care Act that places an annual $2,500 contribution cap on flexible spending accounts [FSAs], that let workers set aside pre-tax dollars to cover medical expenses, some consumers may be spending more on braces, expensive eyewear and other medical supplies they would typically buy with the accounts.
Before the new rule, there was no official cap on how much taxpayers could stash into the account, though many companies typically set their own limits of $5,000.
Now, for a person in the 25 percent tax bracket, the cap cuts the maximum tax break in half to $625 from $1,250.
Stan
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Health care flexible spending account (FSA)
This type of account is a pre-tax benefit account you can use to cover a variety of healthcare products and services, from acupuncture and physical therapy, to vaccines and over-the-counter medicine.
You can now put up to $2,550 of tax-free money into this account in 2015, and save about 30% on healthcare expenses with the tax break.
Stan
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