The United States House of Representatives passed the Health Care Cost Reduction Act of 2012 last week. If the act becomes law, it would modify the flexible spending account "use-it-or-lose-it" rule. While part of a larger bill focusing on various health care concerns, the changes intend to modify some well-established flexible spending account operational requirements.
Use-it-or-lose-it rule: Under the use it or lose it rule, participants who do not use all of the amounts in their flexible spending accounts by the end of the plan year (and grace period, if any), must forfeit the money. The House bill would amend this requirement allow a participant to reclaim up to $500 of his or her unused FSA balance by the 7th month after the end of the plan year.
Over-the-counter medicines and drugs: Health care reform instituted a requirement that a purchase of an over the counter drug or medicine requires a prescription for reimbursement from a health FSA. The House bill eliminates the prescription requirement for over-the-counter medicine or drug purchases.
Effective Date: The legislation still has to be passed by the Senate and approved by the President. It is widely expected that President Obama will veto the bill, in its current form. If approved, the changes would take effect for taxable years beginning in 2014.
