WASHINGTON BUREAU — S. 1404, a new Senate bill, could change the flexible spending account “use it or lose it” rule.
The bill would let consumers pay taxes on any funds remaining in FSAs at the end of the year, then withdraw the funds.
Current rules require that any leftover balance in an FSA must be forfeited to the employer at the end of the plan year.
S. 1404, the Medical Flexible Spending Account Improvement Act bill, was introduced by Sens. Ben Cardin, D-Md., and Mike Enzi, R-Wyo.
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The bill is the Senate counterpart to H.R. 1004, which was introduced with bipartisan support in March by Reps. Charles Boustany, R-La., and John Larson, D-Conn.
The Internal Revenue Service created the use-it-or-lose-it rule to keep taxpayers from using FSAs as tax shelters, but that reason is no longer relevant, Cardin and Enzi say.