FSAs, HSAs and BCRA

FSAs, HSAs and BCRA – The New Senate Healthcare Bill

FSAs, HSAs and BCRAOn Thursday, June 22, 2017, Senate Republicans released the draft of their new healthcare proposal, known as the Better Care Reconciliation Act (BCRA). Similar to the previously proposed American Healthcare Act (ACHA), Americans will see big changes to both FSAs and HSAs should the BCRA pass in its current form. The following provides an overview of FSAs, HSAs and BCRA.

FSAs, HSAs and BCRA

Flexible Spending Accounts (FSAs)

BCRA proposes to eliminate caps on employee contributions to their FSA, both in the future and retroactively to plan years beginning after December 31, 2016.

Health Spending Accounts (HSAs)

If approved, BCRA would affect HSAs in several ways:

  • Increase HSA contribution limits. Starting January 1, 2018, HSA contribution limits would increase to $6,550 for those filing single, and $13,100 for those with family coverage. This is nearly double the currently scheduled limits for 2018, which were released by the IRS in May.
  • Reduce taxes for non-eligible expenses. It would reduce the excise tax on HSA distributions that are not used for qualified medical expenses. Currently, the ACA imposes a 20 percent tax; under BCRA, these distributions would be subject to a 10 percent tax. This would go into effect for distributions made after December 31, 2016.
  • Permit catchup contributions from spouses. Both spouses, not just the HSA owner, would be allowed to make catchup contributions ($1,000 over the annual limit for those 55 and older) starting January 1, 2018.
  • Expand HSA claims filing dates. For eligible medical expenses, “as long as the HSA is established within 60 days of the date of coverage under the eligible high deductible health plan begins, any medical expenses incurred after the coverage date of the high deductible plan will be considered eligible medical expenses regardless that the expenses may be incurred prior to the establishment of the HSA.” This would be effective for coverage beginning after December 31, 2017.

Over-the-Counter Medications

BCRA would allow over the counter medications to become eligible expenses. In 2011, following implementation of the Affordable Care Act (ACA), most OTC medications were removed from the eligible expense list. If approved, this would affect amounts paid or expenses incurred after December 31, 2016.

Keep in Mind

The Senate is still debating the proposal. If passed by the Senate, the bill would then go to the House of Representatives for review and a vote.

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