Flexible spending plans are tax free accounts offered by employers to their employees. These specialized accounts assist individuals paying for items that are not covered by insurance coverage. The idea of the flex plan is that you decrease your taxable income and increase the income that you can spend without imposed taxes. Typically co-pays, vision, dental work, specialized equipment and prescriptions are expenses often paid for with flexible spending plans. Flex spending accounts are reported to save individuals thousands of dollars a year, depending on their individual contributions and usage.
Regulations on Accounts
Currently there is no federal regulation placing a cap on these flexible spending accounts. Although employers that offer these plans sometimes impose a set limit, there is no federal regulation that requires it. Flexible spending plans are used by workers to save income before taxes and use it for medical expenses. The money is saved and used tax free. There are stipulations to the use of the plan as well as guidelines for allowable expenses and a time frame for use of the tax free funds limited to a calendar year.
Capping the Account Arguments
The proposed Health Care Reform Bill is a topic of much conversation and controversy. Health care reform is a complex topic with many pieces that make up the puzzle of proposed reform. One piece of this legislation that has not been in the media spotlight includes the proposal to place a federal cap on all flexible spending accounts. Although it is estimated that the amount that most working people contribute to flexible spending accounts is modest, more that 80 percent of employers with over 500 workers offer the benefit of a flexible spending plan.
Those in favor of the cap argue that it is necessary because many individuals will use the tax free money just because it is there – not necessarily because they need it. Availability is thought to contribute to misuse of medical care, which in turn increases overall health care costs for everyone. Instituting a cap on flexible spending contributions would raise billions of dollars in a ten year time frame allowing the government to use this money for the overall health reform package. While flexible spending plans are thought to benefit the individual, the cap on the tax free money is thought to benefit the masses. The amount of tax free money is proposed to cap at $2500 if this bill passes.
The argument in opposition to the cap on flexible spending plans is that it is one of the few tools that individuals have to plan for and control their medical expenses. The plan allows workers to save for extreme medical conditions with relief from tax. For many working Americans the flexible spending plan is a money saving plan that allows families to pay for uncovered or unplanned medical expenses that may otherwise be unaffordable.
The imposed limits proposed to flexible spending accounts is quickly become a topic of controversy. The idea of the money being taxed as opposed to untaxed money; and the regulations around how it is spent is quickly becoming as much of a human rights issue as it is a financial one. The decision by Congress on the overall health care reform bill will be the deciding factor on the future of the flexible spending plan.
