A Health Care Plus

“Workers faced with forfeiting unused money in their flexible spending accounts for healthcare expenses may be getting some relief under a new federal rule.

The U.S. Treasury Department and Internal Revenue Service changed the use-it-or-lose-it rule for flexible spending arrangements, or FSAs, to allow account holders to carry over as much as $500 from one year to the next without penalty.”

There are four words which can be said: It is about time!

This was one of the best ideas this administration has had as it relates to health care. We need to cheer this very intelligent approach to stop harming the American worker. It is very difficult to estimate the next year’s health care expenses, and then hope it works out as calculated.

The idea that we would lose the excess and that the employer would keep it was a totally unfair penalty, which caused many not to take advantage of a law which otherwise made sense. Now, at least, the employee can utilize the amount left over and make certain it expensed in the first quarter if the following year. In addition, a more reasonable estimate can be made using the carryover funds as part of the next year’s estimate.

Obviously, it is difficult to account for catastrophic illness like cancer, HIV or other unexpected illnesses. But at least the basic needs are accounted for and no longer penalized.

Federal officials said employers could take advantage of this new rule as soon as this year. But benefits consultants said it will be difficult for most employers to make the switch that fast with open enrollment season already underway at most companies. Certainly, for 2015, this part will be a non-issue.

The rule change also could reduce the incentive by workers for unnecessary spending at year-end to avoid losing the money set aside.

Some employers offer a grace period to workers, allowing them to use prior-year balances until March 15 of the following year. Treasury officials said employers would have to pick between a grace period or the rollover option because they won’t be allowed to do both.

The bottom line? It really is about time.