Health Care Flexible Spending Accounts: An Old Benefit With New Appeal

Abstract

Health care flexible spending accounts (HCFSAs) were introduced in the late 1970s, when pretax contributions were first allowed under section 125 of the Internal Revenue Code. However, these benefits have been treated as a "minor league player" in a world of "major league" health plans. But with recent legislative changes and skyrocketing health care costs, HCFSAs are well positioned to become a more valuable health care benefit. To ensure that plan sponsors and employees realize the tremendous advantages that these accounts offer, plan sponsors need to put more muscle behind the promotion of HCFSAs. To be effective, employees will need a greater understanding of how these accounts will benefit them and the role HCFSAs can play in their overall health care planning processes. By encouraging participation in HCFSAs, employers can attain financial gain for themselves and their workforces and compensate for some of the rise in health care expenses. In addition, HCFSAs can help further the cause of health care cost education and bring focus to the need for more awareness and consumerism.