Flex Spending Accounts Face Hit In Health Overhaul

ERICA WERNER

WASHINGTON (AP) — Those tax-free spending accounts that you and your co-workers use to help pay for dental work, insurance copayments or over-the-counter drugs face a hit under the health overhaul bills in Congress — unless a coalition that includes a powerful union, insurers and others can stop it.

Bills in the House and Senate would cap at $2,500 an employee's allowable annual contribution to a health care flexible spending account.

There is no federal cap on contributions now, though companies that offer the accounts — more than 80 percent of companies employing 500 or more workers do — typically impose their own limits, usually around $5,000.

Workers can use the accounts to save pretax income, which then can be used to reimburse a range of medical expenses, including dental and vision costs, prescription and over-the-counter medications and copays and deductibles — again without being taxed.

Capping contributions to the accounts would raise more than $13 billion over 10 years to help pay for Democratic health care legislation because it would limit the amount of employees' income that is exempt from taxation.