Press Release

July 22, 2011

Washington, DC – U.S. Senator Ben Cardin (D-MD) has introduced a bill to modernize and encourage participation in medical flexible spending arrangements (FSAs), which are helpful tools for health care consumers. S. 1404, the Medical FSA Improvement Act, cosponsored by Senator Michael Enzi (R-WY), would allow employees who have medical FSAs to cash out unused amounts, effectively repealing the current “use it or lose it” policy.  Data provided by WageWorks shows that the average unused balance in the end of the year in an FSA is about $100, and each year a total of nearly $400 million remains in FSA accounts.      

“It’s time we stopped penalizing participants for being efficient in the use of their health care dollars and allow for a sensible cash-out option at the end of each program year.  It is both fair and sound health policy,” said Senator Cardin, a member of the Senate Finance Committee.  “Flexible spending arrangements are an important benefit for many Marylanders and for about 35 million Americans nationwide.  The median salary of FSA participants is $55,000 and the tax savings from a medical FSA can make a real difference for working families.”

Flexible spending arrangements allow participating employees to set aside a portion of their income tax-free to pay for out-of-pocket medical expenses, such as co-payments for doctor visits and prescription drugs, medical supplies, and equipment. “Ending the ‘use it or lose it’ rule and allowing for this cash-out option for medical flexible spending arrangements is a common-sense modification that will encourage more efficient participation,” Senator Cardin added.   

More than 85 percent of America’s large employers offer FSAs, but only about 20 percent of eligible employees enroll.  It is estimated that one-third of the nation’s federal employees contribute to an FSA.  Currently in Maryland, more than 50,000 federal benefit from FSAs.       

This bill, S. 1404, is supported by National Treasury Employees Union, which represents more than 150,000 federal employees in 31 agencies, as well as the Employers’ Council on Flexible Compensation, representing more than 100 member companies, including employers, accounting and consulting firms, third party administrators, and actuarial companies.  A bipartisan companion bill has been introduced by U.S. Representatives Charles Boustany and John Larson.