Latest on Flex Accounts

As I discussed in Flex Accounts at Risk a couple months back, congress is looking at reducing the benefits that a Flexible Savings Account can offer you. Right now, there’s no specified limit on the amount you can put away pretax to be used for nonreimbursed medical expenses, although most employers limit the figure to $5000 per year. Kiplinger reports in New Limits Coming on Flex-Account Contributions that it appears that congress is looking at reducing this benefit to $2500 per year. This is unfortunate and will have a greater impact on lower wage earners trying to squeeze out every benefit they can to stretch their dollars than it will the higher wage earner who likely has a more comprehensive health care plan.

One suggestion I’ve seen repeated is that if your child needs braces to take advantage of the flex account in 2010 and use that money. This may be good advice. May. You need to check with the dental side of your insurance and your flex administrator to understand the reimbursement timing. For the plan we have, the insurance assumes a 24 month treatment plan, and only handles the claim over that period regardless of whether or not we pay the orthodontist faster. The flex account then reimburses what the insurance doesn’t cover. The punchline to all of this is twofold. First, with payments spanning 24 months, it’s over two years or potentially three that you can use to fund the flex account. Second, the dollars are backloaded (i.e. your out of pocket cost is higher in the second 12 months than the first.)

With each plan’s rules varying, ask the right questions before you make any decision on your 2010 deposits. The account can be used for other expenses such as prescription glasses, doctor visit copays, over the counter medicines and more. The braces are just an example as they are both expensive and predictable. Let’s see if the proposed changes go through. Tell your congressman you’re not happy about this.

Joe