By Jenny Bowman
Changes to our Flexible Spending Accounts will be in effect for plans starting 2013. We think of Flexible Spending Accounts (FSA) as a way to pay for medical expenses and child care with pretax dollars. For plans beginning 2013, employees will be limited to a contribution cap of $2,500.00 to Health FSA. This change will eliminate the ability to defer compensation as currently there is no cap on health FSAs.
Some FSAs have a grace period of 2 ½ months after year end to offset unused portion, this change will not effect the grace period rule. Employers have until December 31, 2014 to amend their plans, but they must implement them with the start of the 2013 year. For example, if the FSA plan is from September 1-August 31 the cap will start on September 1, 2013.
Congress is working to diminish some of the negative features currently we have with FSAs. Such as the use it or lose it, possible solutions would be to return to the employee up to a certain amount in taxable compensation, or to reinstate the over-the-counter drugs which were in effect up until December 31, 2010.
Please note the cap for FSA is for HEALTH FSAs only…the cap for dependent care FSA will remains unchanged at $5,000.00.