Federal law tightens rules on health spending accounts

Next year, your flexible spending dollars will be less flexible. You may hear about the change the next time your company has its open enrollment for health benefits.

Next year, your flexible spending dollars will be less flexible. You may hear about the change the next time your company has its open enrollment for health benefits.

Experts say policy makers scaled back the flexible account program to discourage excess spending on health care.

Beginning in 2013, the federal health law limits the pre-tax money you can sock away to $2,500. Starting next year, you can no longer use the money for everyday, over-the-counter medications.

Flexible spending accounts are Use-it or Lose-it piggy banks. In order to hold on to savings, consumers sometimes buy unnecessary items such as contact lens solution or several pairs of glasses at the end of the year.

Health policy expert Chuck Marr says the program encourages waste and is also unfair.

Marr: A banker goes out and buys a pair of glasses that cost $1,000, the government is effectively paying $350 of that purchase. Now a teacher, who makes less money, and is in the lower tax bracket, the government is only paying $150 for that teacher.

Marr is with the left-leaning think tank, the Center on Budget and Policy Priorities.

He says the pre-tax savings from flexible spending accounts also offer modest savings for the amount of paperwork required.

Benefits attorney Jean Hemphill works for Ballard Spahr where she helps clients design workplace health plans.

She says the accounts are popular, but it’s hard to estimate how much money you’ll need for out-of-pocket expenses throughout the year.

Hemphill: So people used to run in a the end of December and buy a lot of contact lens fluid or something like that, so that they didn’t lose it. That’s going to be no longer allowed. They can only use it for prescription drugs. Also the maximum amount that you can set aside has been lowered to $2,500.