U.S. senators Ben Cardin (D-Maryland) and Mike Enzi (R-Wyoming) put forth the Medical FSA Improvement Act of 2013 (S. 966), which would amend the Internal Revenue Code to allow employees who use health FSAs to cash out any remaining balance in their account at the end of a plan year. This provision would replace current Internal Revenue Service policy, which says that any unspent FSA funds revert to the employer at the end of the plan year for activities related to the administration of the plan.
“In an economy where every penny counts, it makes little sense for employees who miscalculate their anticipated yearly out-of-pocket health care expenditures at the beginning of a plan year to have to forfeit those funds to their employer at the end of the year, if unspent,” said Cardin. “Millions of private industry workers, as well as federal, state, county and local public sector employees put their money into FSAs to help defray their out-of-pocket health care costs, saving money for them and their families. We should remove any fear these workers have of losing their hard-earned money while encouraging them to use these funds wisely.”
Enzi added, “Medical FSAs help put families and consumers in control of their medical decisions. With the high cost of health care, we should be doing whatever we can to encourage people to be proactive and plan ahead, like putting money into a FSA for out-of-pocket costs. Our legislation will ensure that hard-working Americans don’t lose the money they put aside simply because their health costs were less than they anticipated. It’s time to end use-it-or-lose it for FSAs.”
Text of the bill can be found here.