Legislation approved Tuesday, May 20, by the House of Representatives would
allow individuals called up from the reserves for active military service for at
least six months to take unused balances in their health care flexible spending
accounts as a taxable distribution.
The legislation, H.R. 6081, which was approved on a 403-0 vote, deals with
the forfeiture of unused balances in FSAs when employees are called up for
military service.
That can happen because the individuals and their families typically give up
their employer coverage—including their FSA—and enroll in TriCare, a Department
of Defense health care program that has very low cost-sharing requirements.
Under the legislation, employees could receive a taxable distribution of their
account balance.
“For those called to duty late in the year and who have not incurred many
claims up until that point, this could be very beneficial to them since they
would otherwise have to forfeit the funds,” said Scott Sims, a legal consultant
in the Falls Church, Virginia, office of Hewitt Associates.
The Senate could take up the legislation, which includes other tax breaks for
military personnel, later this week.
If passed, the FSA provision would apply to distributions taken after
enactment.
Filed by Jerry Geisel of
Business
Insurance, a sister publication of Workforce Management. To comment,
e-mail editors@workforce.com.
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