Obama to Veto FSA, HSA Legislation

President Barack Obama will veto legislation that would ease a 28-year-old Internal Revenue Service rule that requires forfeiture of unused flexible spending account balances and eliminates restrictions on using FSAs and health savings accounts to pay for over-the-counter medications, the administration said June 6.

Under the measure headed for a vote this week on the House floor, employers could amend their FSAs to allow employees to withdraw as taxable cash up to $500 in unused balances remaining at the end of the plan year or at the end of an FSA grace period, if an employer has that feature. If passed, the measure would be considered by the Senate.

In addition, H.R. 436 would overturn a health care reform law provision that allows FSA reimbursement of OTC medications without a prescription and imposes a 20% federal tax on HSA distributions for OTC medications obtained without a prescription.

Those provisions are part of a broader bill, H.R 436, that would repeal a provision from the Patient Protection and Affordable Care Act that imposes new federal excise taxes on medical devices and boosts repayments of federal premium subsidies provided to low-income and middle-class uninsured individuals in situations in which the subsidies turn out to be higher than the individuals were entitled.

It is those provisions that the administration opposes.

“This excise tax is one of several designed so that industries that gain from the coverage expansion will help offset the cost of that expansion,” the Office of Management and Budget said in a statement.

“In sum, H.R. 436 would fund tax breaks for industry by raising taxes on middle-class and low-income families. Instead of working together to reduce health care costs, H.R. 436 chooses to refight old political battles over health care. If the president were presented with H.R. 436, his senior advisers would recommend that he veto the bill,” OMB said.

Jerry Geisel writes for Business Insurance, a sister publication of Workforce Management. To comment, email editors@workforce.com.

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