If you and/or your company have not yet signed up for health Flexible Spending Accounts (FSAs), then you are missing out on an opportunity to avoid taxes on medical care. An FSA allows an employee to pay for their medical bills through a self-funded, tax-exempt account using a cafeteria plan. The employee pre-loads the FSA card with a non-refundable pre-tax amount from their paycheck, and then uses it like a debit card to pay for medical expenses.
Previously, there was no overall legal limit on FSA contribution amounts. Many large employers set their cap at an average of $5,000 per year. However, with these new changes, the limit for all FSAs is $2,500 per year. These caps, however, are subject to cost-of-living adjustments, and this limit is not applicable to plans with years that begin before 2013.
Despite this being seen as a negative by most who support an entire family on their health plan and spend on average much more than the new limit, there are some other positive changes. The previous “use it or lose it” policy has been removed—so if the contributed amount in the FSA is not used by the end of the year, it will roll over to the next year. There is now permission for a $500 carryover notice for employers, so that they may specify an ability to carry over up to $500 until the next fiscal year. Any grace period must be eliminated before this adjustment can be made.
Employers are able to implement a carryover for the 2013 to 2014 plan year. In order to do so, the employer must eliminate any grace period previously implemented and notify employees of the change. Employers are allowed to set a minimum carryover amount.
Making healthcare affordable to your employees is important in maintaining their well-being and retaining them for the long-term. Here at Employer Advantage Group, we are dedicated to bringing affordable health care to your small business. We have a number of strategies that we would love to discuss with you in order to find the best plan for your company. To learn more about how the Affordable Care Act may affect you, or to look into new health insurance plans for your company, please contact us. We look forward to hearing from you.