FSAs and Health Care Reform – the benefits to being “excepted”

A lot of articles out there on Flexible Spending Accounts (FSAs) and the Affordable Care Act (ACA or Health Care Reform) speak to two main points - a change to over-the-counter eligibility and a pre-tax contribution limit of $2,500 (with good reason; these are the two biggest impacts to FSAs!).

But what about the rest of the law? What about the 90-day waiting period, Summaries of Benefits and Coverage (SBC), lifetime and annual limits, and Comparative Effectiveness Research (CER) Fees? How do these provisions of the almighty ACA affect FSAs?

In short, the reason you see little about these provisions and their impact on FSAs is because the majority of the time, they have no impact whatsoever. FSAs that are considered “excepted benefits” are not required to comply with these provisions of the ACA.

What’s an Excepted FSA?

According to the U.S. Department of Labor, FSAs are considered “excepted” when:

  1. “The maximum benefit payable for the employee under the health FSA for the year does not exceed two times the employee's salary reduction election under the health FSA for the year (or, if greater, the amount of the employee's salary reduction election under the health FSA for the year, plus $500).
  2. The employee has other coverage available under a group health plan of the employer for the year
  3. The other coverage is not limited to benefits that are excepted benefits (US DOL – Technical Release No. 97-01).”

In other words, if the employer makes no contributions to the employees’ FSA and offers another health plan besides the FSA, the FSA is “excepted.”

The term “excepted benefits” originally comes from an exception to FSAs for the portability requirements of HIPAA, and has been used since to exclude the majority of FSAs from many regulations, including widely used within the provisions of the ACA.

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