Providing for Disposition of Unused Health Benefits in Cafeteria Plans and Flexible Spending Arrangements

PROVIDING FOR DISPOSITION OF UNUSED HEALTH BENEFITS IN CAFETERIA PLANS AND FLEXIBLE SPENDING ARRANGEMENTS -- (House of Representatives - May 12, 2004)

Mr. McCRERY. Mr. Speaker, pursuant to House Resolution 638, I call up the bill (H.R. 4279) to amend the Internal Revenue Code of 1986 to provide for the disposition of unused health benefits in cafeteria plans and flexible spending arrangements, and ask for its immediate consideration.

BREAK IN TRANSCRIPT

Mr. RAMSTAD. Mr. Speaker, I thank the chairman for yielding me time, and I rise as a strong supporter and cosponsor of this important legislation.

Mr. Speaker, it only makes common sense to allow workers to carry forward unspent funds in their flexible spending accounts to the following year or to allow workers to roll the funds into a new health savings account.

This change is really long overdue. Flexible spending accounts are an important vehicle to help workers and their families save pretax dollars for medical expenses. Because of the tax savings, families can actually save up to 30 percent of the cost of out-of-pocket health care expenses by setting aside a portion of their income in a flexible spending account.

American families, families back home in Minnesota, know only too well that out-of-pocket expenses for health care have been rising at an astonishing rate. In fact, the cost for the average worker and their family has spiked over 100 percent since 1998, with no end in sight.

In spite of the skyrocketing health care costs and the significant tax savings associated with the FSAs, relatively few workers choose to take advantage of this vehicle to save for health care costs. The reason for that is simple: This stupid, arcane, absurd use-it-or-lose-it rule. This rule, this use-it-or-lose-it rule, makes absolutely no sense at all.

As absurd as it is, Mr. Speaker, workers are required to forfeit all unspent funds remaining in their FSA accounts at the end of the plan year. This use-it-or-lose-it rule is totally counterproductive, and it is a huge gamble to families, especially low- and middle-income families who can least afford to guess wrong and lose the unspent funds.

So what is happening is rather than facing that loss, many families with these FSAs rush to spend money at the end of the year, as my colleague previously expressed, often on high-cost medical items. How can we tolerate such a bizarre rule that actually discourages prudent spending on health care? It is time to end the use-it-or-lose-it rule.

Mr. Speaker, Ceridian Corporation, which is the leading administrator of FSAs for employers and is based in my district in Bloomington, Minnesota, estimates that while some 25 million, listen to this, 25 million American workers and their families are eligible to participate in health care FSAs, fewer than 20 percent actually choose to participate. It is obvious why. People do not want to take this gamble, and they are not impressed; in fact, they are discouraged by the use-it-or-lose-it rule.

This bill, which I applaud the gentleman from Louisiana (Chairman MCCRERY) for bringing to the floor today, is very similar to legislation I introduced over 3 years ago, and thanks to the leadership of the gentleman from Louisiana (Mr. McCrery), it is finally here today.

So it is high time, Mr. Speaker, that we address this important, unfinished business. It is time to help millions of workers and their families better afford rising medical costs. It is also time to prevent the wasteful end-of-year spending the use-it-or-lose-it rule now promotes.

I urge my colleagues to support this sensible and balanced reform. We have got to pass this legislation here today, and encourage the other body to follow suit.

Again, I thank the gentleman from Louisiana (Chairman MCCRERY).