[Congressional Record Volume 144, Number 93 (Tuesday, July 14, 1998)]
[Senate]
[Page S8137]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. BENNETT:
  S. 2304. A bill to amend the Internal Revenue Code of 1986 to allow 
the carryover of unused nontaxable benefits under cafeteria plans, 
flexible spending arrangements, and health flexible spending accounts; 
to the Committee on Finance.


                 flexible spending accounts legislation

 Mr. BENNETT. Mr. President, today I introduce a bill to 
provide individuals with greater control over their health care choices 
and dollars. This legislation will allow individuals enrolled in 
Flexible Spending Accounts (FSA) at year's end to move unutilized funds 
in the amount of $500 or less to other tax protected accounts such as: 
a medical savings account, an individual retirement account or a 401k 
account.

  A flexible spending account is one of the options available to 
employers as they provide benefits to their employees. At the beginning 
of the year the employer gives the employee a set number of pre-tax 
benefit dollars which they can then allocate to any one or combination 
of the IRS approved FSA uses: health care, life insurance, day care, 
vacation, or retirement. The employee then must determine at the 
beginning of the year the number of dollars they will put in each 
account. In most cases the employee hopes they have made the 
appropriate allocation. If the employee has over funded a particular 
account they lose those benefit dollars at the end of the year.
  About 21.7 million Americans lose between $125 to $200 every year 
because of a 1984 Internal Revenue Service regulation that governs 
FSAs. Every year Americans lose between $4.3 and $2.7 billion due to 
this IRS regulation! The regulation mandates that individuals with FSAs 
must either ``use-it-or-lose-it.'' In other words, if you do not spend 
your money by the end of the year, your employer gets to keep the money 
you don't spend!
  This legislation will allow individuals enrolled in flexible spending 
accounts at year's end to ``rollover'' or move up to $500 per year from 
their FSA into one of the approved accounts including: IRAs, MSAs, or 
401ks. The funds rolled over into an appropriate account would be 
treated for tax purposes as a rollover contribution for the taxable 
year from which it was unused. The $500 allowable rollover would be 
indexed in increments of $50 and rounded to the lowest multiple of $50.
  I believe this small change would have a significant impact on 
individuals and their health care. First, the incentive would be to 
spend these dollars only on health care services that are necessary, 
thus encouraging rational health care spending rather than the 
irrational health care spending promoted by the ``use-it-or-lose-it'' 
policy. Second, individuals would be more inclined to open up a MSA, 
and in doing so they would have both greater portability and greater 
choice. This would empower individuals by giving them greater control 
over their own health care dollars and expand access and choice. Third, 
more rational spending is likely to translate into lower health care 
costs and greater competition.
  I hope the Senate will act swiftly to hold hearings and to move this 
legislation through the committee process to the Senate floor for final 
consideration. I would urge my colleagues to support this legislation 
and would welcome their cosponsorship. 
                                 ______