Honey, They Shrunk Our FSA!

If you count on your flexible spending account to pay for uncovered medical bills and co-payments, you are going to need to tighten your belt. Senior Correspond...

Just when they were starting to catch on with federal and postal workers, Flexible Spending Accounts are about to become much less flexible and lose much of their appeal next year.

Under current rules workers can set aside up to $5,000 a year in an FSA. The money is pre-tax meaning it reduces your taxable income by the amount of the FSA. And that money can be used for a variety of things including over-the-counter drugs like aspirin, acne medicines, Band-Aids, cough and allergy medicines and most other non-prescription OTC medical items.

But on January 1, 2011 a provision of the Affordable Care Act aimed at FSAs kicks in. After that date FSA money can no longer be used for non-prescription OTC items in most cases. That will be a financial blow to many feds.

As Cliff at OPM says, “Medicines and drugs are still covered; but they require a prescription, except insulin which does not require a prescription. Other eligible over-the-counter items are also still covered.”

And if you like the idea of FSAs, it gets worse…

Beginning in January, 2013, the maximum amount you can put into an FSA will drop from $5,000 to $2,500.

Both changes will have a major financial impact on a lot of people who have come to depend on them to lessen the bite of medical-related costs.

It is easy, especially for a family, to have $2,500 to $5,000 in medical costs each year that are not covered, or not fully covered, by their health insurance. Many people now use FSA funds to cover co-payments, or medical or dental payments not covered by insurance.

How come? Under congressional rules, anytime a future cost is incurred (and the ACA has many) there must be some way to offset those costs.

Most financial planners say that most people could and should have an FSA (if your employer offers one) both as a tax-break and to help covered uncovered expenses. You can estimate how much that FSA should be by looking at how much you spent out of pocket in the previous year. And although the FSAs are on a calendar year basis, you have several months after the year ends to spend down your FSA account.

You can sign up for an FSA during the upcoming benefits open enrollment period (November 8 through December 13th).

For more on your incredible shinking FSA, listen to benefits expert Ed Zurndorfer who appeared on our Your Turn radio show last week. To do that, click here.

Stop Loss Payments

In some communities federal and postal workers make up a large portion of Army and Air National Guard units. Many of them have been deployed, some more than once, to the middle east. And in some cases members of Guard units have been required to stay on duty (they call it “stop loss”) even after their official tour was completed. That was a major hardship, both financially and emotionally, on many guard members and their families.

The good news is that Congress has authorized stop loss payments of $500 for each month guard and reserve personnel were kept on duty under stop-loss orders. The bad news is that many of the eligibles don’t know about the benefit, and the deadline for applying for them is October 21, 2010. If you think you are eligible, or know someone who may be, check it out at: www.defense.gov/stoploss

Lame Duck Congress & You

Tomorrow at 10 a.m. on our Your Turn with Mike Causey radio show, Bill Bransford talks about what the lame duck Congress can do, and may do, to federal workers and retirees. There are proposals for a federal pay freeze and also to furlough, without pay, feds for up to two weeks next year. Bransford is general counsel of the Senior Executive Association.

To reach me: mcausey@federalnewsradio.com

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