Abstract
With flexible spending accounts, better known as FSAs, families can save up to 30% of the cost of their out-of-pocket medical expenses. With the exception of the new and untested health savings accounts enacted as part of the Medicare prescription drug law, FSAs are the only way workers can leverage the U.S. tax code to support their out-of-pocket expenses. However, even after 20 years, fewer than 20% of the estimated 25 million U.S. workers eligible for FSAs elect to participate. FSAs remain unappreciated and overlooked. This article discusses the FSA “use it or lose it” rule, which causes most employees to view FSAs as a gamble. This forfeiture rule prevents FSAs from winning more widespread employee interest because this regulatory obstacle requires employees to forfeit any FSA funds that remain in their account at year-end. Once this rule is modified, FSAs will become the center of employer-based U.S. health care policy.
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