Monday May 20, 2013
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Proposed $500 Bonus from Flexible Spending Accounts
House Ways and Means Committee Chair, Dave Camp, proposed an amendment on May 30 that would permit new flexibility for health flexible spending accounts. His amendment to the Health Flexible Spending Arrangements Improvement Act of 2012 permits employees who have a balance of up to $500 at the end of a year to receive a taxable payment of that amount.
Under current rules, employees are permitted to use salary reductions to allocate funds to a healthcare flexible spending account. The funds in the account may then be used for payment of qualified healthcare expenses.
However, the funds allocated to the account are forfeited back to the employer at the end of the year. Therefore, the accounts are frequently described as a "use it or lose it" plan.
Ways and Means Oversight Subcommittee Chair, Charles Boustany, Jr. (R-LA), proposed that the unspent money could be distributed to the employee as taxable income at the end of the year. Chairman Camp would permit the distribution, but only up to a maximum of $500.
The proposed change in flexible spending accounts will cost the government about $4 billion over the next 10 years according to the Congressional Joint Committee on Taxation.
Editor's Note: If the House passes this change, the Senate would also need to take action. With the fall elections growing closer, it is becoming progressively more difficult to move forward on additional tax bills. If the change does not pass this year, it could quite possibly be included in the anticipated major tax reform expected for 2013.
Under current rules, employees are permitted to use salary reductions to allocate funds to a healthcare flexible spending account. The funds in the account may then be used for payment of qualified healthcare expenses.
However, the funds allocated to the account are forfeited back to the employer at the end of the year. Therefore, the accounts are frequently described as a "use it or lose it" plan.
Ways and Means Oversight Subcommittee Chair, Charles Boustany, Jr. (R-LA), proposed that the unspent money could be distributed to the employee as taxable income at the end of the year. Chairman Camp would permit the distribution, but only up to a maximum of $500.
The proposed change in flexible spending accounts will cost the government about $4 billion over the next 10 years according to the Congressional Joint Committee on Taxation.
Editor's Note: If the House passes this change, the Senate would also need to take action. With the fall elections growing closer, it is becoming progressively more difficult to move forward on additional tax bills. If the change does not pass this year, it could quite possibly be included in the anticipated major tax reform expected for 2013.
Published June 1, 2012
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