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Flexible Spending Accounts May Disappear

Richard Stover, an actuary with Buck Consultants, predicts that Flexible Spending Accounts (FSA) will be the first to go if the Cadillac Tax moves forward as planned.

FSAs allow employees to save their own money, pre-tax, to pay for various health-related expenses including co-pays and deductible, eye glasses, and more. According to Stover, eliminating FSAs may be the most obvious way the Cadillac Tax impacts the middle class.

The Cadillac Tax, which taxes the amount of benefits over $10,200 for individuals and $27,500 for families beginning in 2018, is expected to apply to traditional health insurance, supplemental health insurance plans, flexible spending accounts and, potentially, worksite clinics. 

In his August 31, 2015 article in Politico. author Brian Failer points out that "The Cadillac tax will cap for the first time the open-ended tax break employers receive for providing their workers with health benefits. Economists love the tax because they say that break is a big reason for rising health care costs. Overly generous insurance coverage shields beneficiaries from having to worry about the cost of their care, they say, which encourages them to use more services, which drives up prices.But the tax is quickly becoming one of Obamacare’s least popular components, and businesses and unions alike are demanding lawmakers scrap it before it takes effect."

Repeal of the Cadillac Tax is being pushed for from many fronts, but is not expected to happen during the Obama administration. Both Clinton and Sanders have signaled willingness to reconsider it if elected.

In the meantime, employers are already taking steps to avoid the tax and it is doubtful that they will reinstate many of these changes if the tax is repealed.

Read more here.

Posted by Cristie Travis at 9:02 AM

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