We have been monitoring several bills in Congress whose passage would have a positive impact on our clients’ flexible benefit programs. While many have bi-partisan support and the support of the industry, all face uphill battles. Why you may ask?
As you will recall from our past newsletter articles, Flexible Spending Arrangements (FSA), Health Savings Accounts (HSA), Health Reimbursement Arrangements (HRA), Commuter Benefits and health premium conversion all have one thing in common: beneficial tax savings to employers and participants. To be more specific – millions of dollars in tax savings. So much so that Congress has eyed that pot of gold more than once to make up for shortfalls. In fact, capping the medical FSA to $2500 was one of the funding strategies for the Patient Protection and Affordable Care Act (PPACA). And although the story about restricting reimbursement of over-the-counter (OTC) drugs cited fraud and abuse as the rationale, there can be no denying that it also helped reduce tax savings significantly. In our opinion, huge pressure on the deficit will make it hard to pass any legislation that decreases the coffers rather than increases them this year. As we prepare this article, Congress and the White House have yet to reach agreement on a deficit reduction deal. One recommendation from the so called Gang of 6 calls for eliminating the Community Living Assistance Services and Supports Act (CLASS Act) long term care program under PPACA (increases the coffers).
Yet with that said, three of the proposed bills we are following would repeal the $2500 cap on medical FSAs; three would increase the annual contribution of dependent care FSAs to $7500; no less than four would amend the OTC-RX requirement, and two would amend use it or lose it (all decrease the coffers) It might be said that as one hand tries to giveth the other tries to taketh away. We will continue to monitor for you so stay tuned.
Restoring Access to Medication Act (S. 1368; HR 2529)
This bi-partisan legislation would repeal the provision of PPACA that requires individuals to obtain a physician prescription to receive reimbursement through a tax-favored account for OTCs.
Restoring Assistance for Families’ and Seniors’ Health Expenses Act of 2011 (HR 450)
This Republican backed bill would repeal provisions of PPACA that:
1) Increase from 7.5% to 10% the adjusted gross income threshold for claiming medical tax deduction;
2) Restrict tax-favored accounts from reimbursing OTCs without an RX (see previous bills);
3) Increase the penalty for ineligible distributions from an HSA or Archer MSA; and
4) Caps medical FSA contributions to $2500
Patients’ Freedom to Choose Act (HR 605; S312)
These Republican backed bills would repeal provisions of PPACA that:
1) Restrict tax-favored accounts from reimbursing OTCs without an RX (see previous bills);
2) Caps medical FSA contributions to $2500
Prescribed Medicine (does not have an official short title – this is how FBMC refers to this bill) (HR 2529)
Bi-partisan bill that would repeal the provision of PPACA that makes OTCs impermissible for reimbursement without an RX (see previous bills)
DCAP Enhancement (does not have an official short title) (HR 682; S 387)
These bi-partisan bills would increase the contribution limits for dependent care FSAs to $7500 ($3750 for single filer) and also provides for a carryover of unused contributions.
Child and Dependent Care FSA Enhancement Act (S 435)
Bi-partisan bill that amends the Code to increase the contribution limits to dependent care FSAs to $7500 and permit an inflation adjustment after 2011 (see previous bill)
Medical FSA Improvement Act of 2011 (HR 1004; S1404)
Bi-partisan bills that would amend the 1986 Internal Revenue Code to address the use it or lose it provision. It would permit employers to allow employees to cash-out unused FSA balances at the end of the year with the amounts being treated as taxable income.
HSA Enhancement (does not have an official short title) (HR 2010; S 1098)
Republican backed bills that would expand HSAs.
Quarterly Review Researchers and Authors
Left to Right
Florrie Jones, CFC Senior Compliance Specialist
2010 FBMC Employee of the Year. Florrie authored the article on Medicare titled Coverage Notice Requirement Accelerated in this newsletter edition.
Lena Lewis, MBA Compliance Specialist
See also Lena’s article on the many court challenges to the Patient Protection and Affordable Care Act in PPACA 1 Year Later.
Trish Neely, CFCI Chief Compliance Officer,
Editor. See also: Everything about Exchanges, a preview of the new rules issued by the Department of Health and Human Services.