Limited Flexibility
Proposals to cap flexible spending accounts could gain traction in the health care debate.
One issue in the health care reform debate could involve a proposal to cap flexible spending accounts -- pre-tax funds that employees can use to cover certain out-of-pocket medical expenses -- which many federal workers use.
The House version of the health care reform legislation (H.R. 3200) currently includes an amendment that would limit the scope of FSAs by prohibiting employees from using them to pay for over-the-counter medicines -- a move that the Joint Committee on Taxation estimated would save the government $8.2 billion over 10 years.
About 290,000 federal employees take advantage of the government's flexible spending account options, more than 10 percent of the civilian workforce, according to FSAFEDS, a company that manages the accounts for most federal agencies. The government offers three choices: a health care flexible spending account, a limited expense health care flexible spending account, and a dependent care flexible spending account. FSAFEDS says it caps the accounts at $5,000 annually for health care benefits and $5,000 for dependent care. Some legislative proposals reportedly floating around on Capitol Hill would cap FSAs at $2,000 annually.
Federal Managers Association Executive Director Todd Wells said he wasn't aware of any legislative proposal to limit FSAs -- but he opposed the idea.
In the 2008 Federal Human Capital Survey, 40.3 percent of respondents said they were satisfied with their flexible spending accounts. Only 8.1 percent were dissatisfied with their FSAs. The majority of respondents said they either didn't have a basis to judge (32.2 percent), or they were neither satisfied nor dissatisfied (24 percent).
Matt Biggs, legislative director of the International Federation of Professional and Technical Engineers, said many of the union's members were "not big fans" of the program, based on several complaints he has received.
Save Flexible Spending Plans, an advocacy group sponsored by the nonprofit Employers Council on Flexible Compensation, is lobbying Congress to protect FSAs.
"If Congress limits the use of FSAs, it will force plan participants to pay higher taxes and health care costs at a time when many can least afford it," said Susan Haralson, a representative for the group.