It’s not too soon to start preparing for new health care flexible spending account rules that take affect beginning next year—or consider a new approach to health care spending with health savings accounts. At least that’s what OptumHealth says.
Though current law doesn’t set a dollar limit on FSA contributions, the Patient Protection and Affordable Care Act sets a new $2,500 limit on annual contributions to health care FSAs. This limit applies to all FSA plans in taxable years beginning after Dec. 31, 2012.
OptumHealth offers the following tips in accordance with the new rules:
• Employers with plans that currently allow a health care FSA election of more than $2,500 must amend their plan documents before Jan. 1, 2013 to comply with the new limit. Sponsors of non-calendar-year plans should consider acting now by adopting the new limit as of the first day of the plan year, rather than waiting until January 1, 2013. For example, if an employer’s plan year begins May 1, 2012 and ends April 30, 2013, it can amend its plan so that the contribution limit is effective as of May 1, 2012.
• Employers should emphasize to employees that FSAs remain a valuable benefit and that contributions can still help them plan, save and pay for health care. Regardless of when their plan year starts, all employers sponsoring health care FSAs should remember to update their plan communication materials.
• Employers who offer an HSA may want to consider adding a limited-purpose health care FSA (allowing employees to set aside pre-tax dollars for eligible dental and vision care expenses). Or, employers who aren’t offering HSA-eligible, high-deductible plans may want to consider them.
Paired together, limited-purpose FSAs and HSAs allow employees to maximize their tax-advantaged savings for health care, OptumHealth says. They can use limited-purpose FSA funds to reimburse themselves for dental and vision care, and use HSA funds to pay or reimburse themselves for qualified medical expenses (deductibles and co-insurance, for example) and save for future expenses. HSA contribution limits for 2012 are $3,100 for individual coverage and $6,250 for family coverage.