BOSTON (TheStreet) -- American workers have had to endure millions of job losses, a decade's worth of declines in their retirement plans and higher health-insurance contributions. And now flexible-spending accounts, used by 35 million people in the country, are under threat.
Legislation introduced last month by Sen. Max Baucus (D-Mont.), as part of health-care reform, would place a $2,500 cap on FSA contributions and eliminate the use of the benefit for over-the-counter medications without a doctor's prescription. It would also tax high-deductible insurance plans preferred by many flexible-spending account users.
Eliminating flexible-spending accounts' tax breaks could save $69 billion over 10 years, money that could chisel away 5% of the projected costs of health-care reform. Americans put about $6.1 billion into flexible-spending accounts a year.
Flexible-spending accounts, typically managed as an employee benefit, allow workers to use pre-tax dollars to pay for eligible out-of-pocket health-care expenses such as prescription drug co-payments, vision and dental costs, office visits and medical supplies.FSAs contain a use-it-or-lose-it clause. Health-savings accounts, which are similar, can be rolled over from year to year, accruing compound interest through investments. The plans can be obtained through an employer as well as qualified banks and insurance companies. Contributions can be made pre-tax, and interest and earnings are tax-free, as are distributions when used for qualified medical expenses. Of the 35 million people in the country with flexible-spending accounts, 8 million have health-savings accounts. More than 85% of large employers offer FSAs, and the average range of contributions is $1,600 to $1,900 a year.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV