2014 Flexible Spending Accounts (FSAs)

BENCHMARK STUDY

healthcaretrendsinstitute.org

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BackgroundIn the fall of 2013, the U.S. Treasury Department issued new rules

allowing employers a $500 carryover option for their employees’ FSA money. Many companies had to work quickly to determine the viability of offering this new option versus going with the grace period allowing employees to roll over their entire unused account balance into the following year to pay for medical expenses incurred during the first 2 ½ months of the next plan year before the money is forfeited. Other organizations were already in the process of their 2014 open enrollment period and thus began their consideration of offering the new FSA option for their 2015 plan year.

The Flexible Spending Account Benchmark Study gathered results from participants in all company sizes regarding their FSA approach in 2013 through 2015. Flexible spending accounts (FSA) provide employees a way to deduct pretax dollars from their paycheck to pay for certain types of medical, vision and dental expenses. These accounts offer companies a way to help employees manage their health care costs.

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Insights:When the FSA plan changes became effective for plan year 2014, over

half of companies (51%) adopted the rollover option versus 49 percent who elected to offer a grace period of up to 75 days. In the past, employees may have forgone signing up for an FSA and the accompanying tax benefits for fear of losing their pretax money that they put in. It appears employers recognized the stumbling block of the old use-it-or-lose-it rule, which 68 percent of survey participants cited as their primary reason to adopt the rollover option in 2014.

In 2014, did your organization:

What was the primary reason you adopted

the rollover option for 2014?

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What was the average employee

contribution to his/her healthcare FSA?

What percentage of benefits-eligible

employees participated in a healthcare

FSA in 2014?

Insights:There was a wide range of responses related to employee participation

in 2014. Nearly 40 percent (37.3%) reported 20 percent to 40 percent participation, while 26 percent reported up to 20 percent participation, and almost 20 percent said 40 to 60 percent of employees participated in a healthcare FSA. Employees funded their FSAs with up to $2,500. The largest group at 66.7 percent contributed between $1,001 and $2,000 in 2014, which was a slight increase from 2013 contributions.

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