Health care flexible spending accounts (FSAs) are good ways for employees to save when it comes to health care costs. They contribute pre-tax income to the accounts and use the money to pay for medical expenses. Yet, because of the condition that if the employee does not use the money it will return to the employer, only 37 percent of employees took advantage of FSAs in 2010.

There are a few ways to change FSAs that might make them more useful to employees. The first is a contribution cap, which would limit how much money employees could contribute to their FSAs. While the Internal Revenue Services did not enforce a cap, many employers limit how much their employees can contribute to their account, said Ballard Spahr partner Brian M. Pinheiro. The other way would be for the IRS to abolish the “use it or lose it” rule.

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Employee Benefits and Executive Compensation
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