I've complained previously about how Healthcare Reform led to over-the-counter (OTC) stuff being excluded from eligibility in Flexible Spending Accounts (FSA). I've just done my own open benefits enrollment for next year, and learned that things aren't quite as dire as I thought. The OTC restriction does apply to medications and biologicals, so for instance I can no longer charge the cost of cough drops and cold remedies against the FSA; however, things like bandages, braces, and similar non-biological items continue to be eligible. This means, for instance, that the Breath-Right strips I use in conjunction with my CPAP mask to reduce my sleep apnea and the wrist brace Lisa wears for her carpal tunnel symptoms should continue to be eligible. That's good, and it means I could increase my deduction pledge a bit because I now know that if there's a little bit left over next December, I can "soak up" the surplus by buying a case of Breath-Rights or something like that.
I still think that the FSAs aren't implemented correctly, becuase you're not allowed to roll them over from year to year. Any unspent amounts are forefited. (To whom? The government? Or your employer? I've never been able to find an answer to this.) I think you should be able to roll them over and accumulate them indefinitely, as long as you only spend them on healthcare-related things. I know I'd withhold more than I do if I knew I wasn't having to risk losing contributions at year-end. I think of it as an additional sort of self-insurance. In particular, if you anticipate a major medical expense coming in several years, you could spend time accumulating funds to pay your share of it. This is especially important when it comes to things my insurance won't cover, like hearing aids. The incentive to not withhold too much is that while it's pre-tax money, you're not earning any interest on it like you do on a 401(k) plan.
I don't mind having some responsibility for my healthcare choices, but the current FSA system reduces my flexibility to do so.
thoughtful