Congress is proposing a new health care bill. In it supposedly is a provision to cap the amount a person can put into their Flexible Spending Account (FSA). If you're not familiar with FSA's, people can contribute a portion of their pay, pre-tax, to an account from which they can be reimbursed for health, vision and child care expenses. If they don't get reimbursed, the company keeps the money and the employee has lost the money. The new cap is $2,500.
A lot of pundits are screaming bloody murder that the government is taking away something.
Wait a minute! One of the problems with FSA's is trying to guess how much you're going to need for reimbursement. If you guess wrong, you've withheld too little or too much. If it's too much, you lose money.
If a person is going to have $2,500 in reimbursable health expenses, they should switch to a Health Savings Account. The money earns interest and it can't be taken away. The amount carries over. You can contribute more if you want or need to. The only drawback compared to FSA's: you can't use the money for child care expenses.
Now one of my real questions: what percentage of people contribute more than $2,500 to their FSA's? How many people are affected by this potential change in the law? 5%, 10%, 20% or more?
The pundits complain that it will be a tax on the middle class because now people will be taxed on whatever amount they would have put into their tax-free FSA above $2,500. But what is it?
And the pundits don't acknowledge that we have options, namely an HSA.
Go figure!
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