Carry-Overs Not Enacted

The use-or-lose feature of FSAs-a requirement of the tax code-has drawn criticism as encouraging wasteful year-end spending on the one hand and as penalizing participants who miscalculated their likely reimbursable spending on the other. The Bush administration has proposed allowing $500 to be carried over from one year to the next, and the House-passed version of the Medicare reform bill contained that provision. However, that language was dropped in a conference with the Senate after objections that an FSA provision didn’t belong in the Medicare bill. Variants on the carry-forward idea are pending in several other bills before Congress. However, none of those bills has been enacted to date.