FSA Participation Picking Up

The current use-or-lose feature of FSAs is considered a major disincentive against opening such accounts; sponsors of the bill argued that for health care FSAs, especially, it’s difficult for an individual to predict how much money will be spent in a year. That issue was one factor cited in the relatively low rate of participation after the executive branch started allowing FSAs effective last July 1 (there were other factors as well, including the inability of some agencies to meet the startup date and uncertainty regarding whether agencies would pay enrollment fees for their employees). Employees expressed concern about having to forfeit money, even though in many cases they might have come out ahead anyway due to what they would have saved on taxes. The Office of Personnel Management recently reported that while only 28,000 employees opened health care FSAs and only 7,000 had dependent care FSAs last year, those numbers rose to 118,000 and 18,000, respectively, for the 2004 plan year. The Bush administration has proposed allowing rollovers in its last several budgets, and the idea has garnered bipartisan support.