Senate Targets Flexible Spending Accounts

They just can't help themselves, here you have a program that gives people the ability to spend the money as they see fit, and they have to destroy it. The medical savings account is similar to a 401 (k) in that you can steer money pre-tax into them but must use the money for "medical" purposes and spend it that year.

Who would have thought that so many people would go to the mat over the lowly flexible spending account?

Flexible spending accounts allow people to take money out of their paychecks before paying taxes on it and to set it aside to use for health care expenses that insurance doesn’t cover. There is no legal limit on how much you can set aside each year, though employers generally set a cap around $4,000 or $5,000.

Senator Max Baucus, Democrat of Montana and author of the Senate health care bill, would like to place a much lower $2,500 annual limit on what people can save, among other restrictions. The House-Senate Joint Committee on Taxation figures this will allow the government to take in $14.6 billion from 2011 and 2019. So far so good right? We have to pay for the health care bill somehow.

The problem, however, is that to people who put more than $2,500 away each year, this looks an awful lot like a tax increase. After all, if they can’t put as much money aside, they’ll pay more in income and payroll taxes. And President Obama, when he was running for office, promised that no family earning under $250,000 would see higher taxes.

Now, a not-quite grass-roots effort has sprung up, led by companies that administer flexible spending accounts and others. At savemyflexplan.org, the group encourages individuals to write their representatives in Washington and sound off.

They just can't help themselves.