Manisha's Money Saving Tips

Common-Sense Reforms Could Improve FSAs

By Manisha Thakor | August 31, 2011

There's no doubt that resolving our debt crisis is important, but what is top of mind for many is to find ways to deal with our own household economic needs. Beyond broader economic solutions, the federal government should seek to implement policies that provide immediate relief to consumers struggling with such challenges as stagnant wages and the increased cost of health care.

Specifically, the federal government has an opportunity to improve the access and viability of pre-tax flexible spending accounts – accounts exclusively designed to save consumers money.

Over the past year, I've had the honor to team up with WageWorks on a nationwide campaign designed to educate consumers about the value and appropriate use of pre-tax accounts, which can help consumers save up to 40% on eligible out-of-pockets costs for health care, dependent care and commuting. However, the health care accounts could be greatly improved for consumers if the government adopted a few common-sense rule changes.

End the “Use It or Lose It” Rule

As I speak to employees around the country who are eligible for this generous benefit, time and again the number one reason I hear why people don’t sign up is because of the "use it or lose it" rule, which requires participants to give up any unused funds in their accounts at the end of the plan year. Although the average FSA participant actually saves quite a bit more than they forfeit, there is a simple way to eliminate this fear and increase participation – end the rule.

It’s time for Congress and the Administration to simply allow consumers to cash out and pay taxes on their remaining FSA balance at the end of the plan year or to roll over any unused amounts to a future year. As a result of this change, consumers would get much-needed help with covering the cost of increasing out-of-pocket health care expenses, dollars earmarked by consumers for health care costs wouldn’t be wasted on unnecessary services or products in a “rush to spend” unused funds and, in the case where unused funds are cashed out, the government would receive additional tax revenue.

End the “OTC Prescription” Rule

Many consumers manage their own health care with over-the-counter (OTC) medications. Unfortunately, the Affordable Care Act included a new rule that prohibits OTC items from being paid for with FSA, HSA, and HRA dollars unless a prescription is first obtained from a doctor for those items.

And we're not talking high-powered drugs. The OTC list includes things like allergy medication and everyday pain relievers. Making an extra appointment to get prescriptions for these common OTC items is a burden on the healthcare system and patients alike, and drives up health care costs. Clearly, the OTC prescription rule needs to be scrapped to provide consumers with practical access to health care treatment and health care funds.

Tell Congress to Improve the Access and Use of FSAs

Thankfully, these simple fixes to FSAs have already been recognized and included in legislation introduced by Congress earlier this year. I know common-sense compromises have always been at the heart of American policy, and I sincerely hope that our government takes action to remove these restrictions this year.

If you agree with me that these fixes should be made, I strongly encourage you to understand the issues and get involved. To find out who your representative is and learn more, visit

Real Stories. Real Users.


From Florida

“My FSA is a life saver! Last year I was diagnosed with a malignant tumor and luckily I was able to have the necessary surgeries to remove it immediately since my FSA covered all of the out-of-pocket costs for my deductible and medicines.”

Annual Savings: $816

Read more about how real people use their pre-tax benefits.