Kilmer, McMorris Rodgers Introduce Legislation to Help Families Save for Planned Medical Procedures
U.S. Representatives Derek Kilmer (WA-06) and Cathy McMorris Rodgers (WA-05) introduced new legislation on Tuesday to give families additional flexibility to use 2020 Flexible Spending Account (FSA) contributions to adjust for delays in accessing non-emergency care caused by the COVID-19 pandemic.
According to the American College of Surgeons, more than 30 states currently have executive orders in place limiting most non-emergency medical and dental procedures, following guidance from the Centers for Disease Control and Prevention (CDC) intended to limit the rate of transmission of COVID-19 and reduce the overall strain on the nation’s healthcare system and resources. As a result of these orders, many individuals and families who contribute to an FSA to cover the cost of planned or routine medical expenses risk losing those funds because they are unable to access the care they had budgeted for before the end of the plan year.
The COVID-19 Flexible Spending Account Rollover Act would address this problem by amending the Internal Revenue Code to allow any FSA balances remaining at the end of the 2020 plan year to be rolled over to 2021 without penalty to provide greater flexibility to use these funds once the CDC and states have determined it is safe to resume non-emergency procedures. This would be a simple one-year deferral, so any funds not used by the end of the 2021 plan year would still be forfeited.
“This proposal is about fairness and about protecting the financial well-being of folks across our region,” said Rep. Kilmer. “With people already facing financial uncertainty, they shouldn’t be penalized when this crisis means they can’t use money they’ve socked away for medical procedures. Congress should help workers and families have the resources they need. Our bill ensures folks can avoid losing their FSA savings during this crisis and enables more people to use these funds for medical procedures when it is safe to do so.”
According to the Bureau of Labor Statistics, 41 percent of private industry employees and 69 percent of state and local government employees had access to a health care FSA in 2019. These tax-exempt FSAs enable employees to save money and budget for planned medical expenses. For example, a family making $50,000 can save over $800 in taxes or about 30% on their annual medical expenses if they contribute the maximum to their FSA. However, there are strict annual limitations on FSA contributions and typically the funds must be used within the same plan year.
While some employers may offer a grace period of up to 2.5 months to use the funds and/or allow employees to roll over up to $500 to the following plan year, when the plan year and/or grace period has ended, employees forfeit all unused funds. This means that under current law, countless workers who have already contributed to their FSA for the 2020 plan year will be forced to forfeit their funds due to no fault of their own.
A one-pager can be found here and bill text can be found here.
Source: The Surburban Times