Sens. Warner and Kaine Lead Senate Majority In Effort To Allow Rollovers For FSA Accounts

WASHINGTON, D.C. – Today, U.S. Senators Mark Warner and Tim Kaine, joined by their Senate colleagues Ben Cardin (D-MD) and Barbara A. Mikulski (D-MD), led an effort in the Senate urging Office of Personnel Management (OPM) Director Kathleen Archuleta to allow federal workers the opportunity to take advantage of the new Treasury/IRS rule allowing a $500 rollover of unused health Flexible Savings Accounts (FSA) funds towards out-of-pocket health care costs and help keep families and consumers in control of their health care decisions. The letter received the support of all 53 Senate Democrats and two Independents and follows a notable change by the Department of the Treasury on October 31that gives employers a choice to roll over their employees’ FSA fund to the following year, or provide a grace period to use available funds in the following year.

“It is unreasonable to expect health FSA participants to accurately forecast their out-of-pocket medical expenses a year in advance, and it is unfair to penalize them at the end of the plan year should their estimates prove to be inaccurate,” the Senators wrote in their letter.  According to OPM’s own data, in 2012, 30,940 federal employees – nearly 10 percent of participating employees -- forfeited an average of $392 each in contributions because of the “use-or-lose” rule.

The Senators noted that the U.S. Treasury and IRS have recognized the value of providing a rollover option for employees nationwide. “We urge you to provide this benefit to federal employees without delay,” they added.

A copy of the letter can be found here and below.

Director Katherine Archuleta
U.S. Office of Personnel Management
1900 E Street, N.W.
Washington, DC 20415 

Dear Director Archuleta: 

We write to urge you to modify the “use-or-lose” rule for Health Flexible Spending Arrangements available to federal employees through the FSAFEDS program to allow an annual rollover of up to $500 in unspent funds.

The health FSA is an important financial tool that permits workers to set aside up to $2,500 annually in tax-preferred accounts to pay for unreimbursed health expenses, such as copayments for doctor visits, prescription drugs, and medical supplies. Surveys of eligible participants indicate the primary reason for declining to enroll or for underfunding their accounts I concern about the “use-or-lose” rule, which requires participants to spend their entire contribution before the end of their plan year or forfeit the unused funds back to their employer.

According to OPM data, in 2012, approximately 322,700 federal workers held health FSAs, and the average election amount was $2,050. That year, 30,940 federal employees forfeited an average of $392 each in contributions because of the “use-or-lose” rule. It is unreasonable to expect health FSA participants to accurately forecast their out-of-pocket medical expenses a year in advance, and it is unfair to penalize them at the end of the plan year should their estimates prove to be inaccurate.

Fortunately, on October 31, the U.S. Department of the Treasury and the Internal Revenue Service issues a notice modifying the “use-or-lose” rule for health FSAs, permitting employers to allow participants to carry over up to $500 of their unused balances remaining at the end of a plan year. Some plan sponsors have chosen to adopt the carryover provisions for 2013, but federal employees may only benefit from the Treasury/IRS ruling if your agency takes action. We are told that, as of last week, OPM had not yet decided whether to extend the carryover option to the federal workforce.

We urge you to provide this benefit to federal employees without delay.

Sincerely,

Ben Cardin
Barbara Mikulski
Mark Warner
Tim Kaine
Tammy Baldwin
Max Baucus
Mark Begich
Michael Bennet
Richard Blumenthal
Cory Booker
Barbara Boxer
Sherrod Brown
Maria Cantwell
Tom Carper
Robert Casey
Chris Coons
Joe Donnelly
Richard Durbin
Dianne Feinstein
Al Franken
Kirsten Gillibrand
Kay Hagan
Tom Harkin
Heidi Heitkamp
Martin Heinrich
Mazie Hirono
Tim Johnson
Angus King
Amy Klobuchar
Mary Landrieu
Patrick Leahy
Carl Levin
Joe Manchin
Claire McCaskill
Ed Markey
Robert Menendez
Jeff Merkley
Chris Murphy
Patty Murray
Bill Nelson
Mark Pryor
Jack Reed
Harry Reid
John Rockefeller
Bernie Sanders
Charles Schumer
Brian Schatz
Jeanne Shaheen
Debbie Stabenow
Jon Tester
Mark Udall
Tom Udall
Elizabeth Warren
Sheldon Whitehouse
Ron Wyden

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