$200 Million Lost From Worker Health Care Accounts

[jeffrey]

With the coming of the end of the year, workers will end up forfeiting over $200 million dollars they contributed to their health care spending accounts simply because they forgot to use it all up. Any money that is not used will end up going to their employers.

Account holders end up forfeiting the money due to the way the accounts are set up. If all the money deposited into an account is not used entirely by the end of the year, all remaining money is forfeited. Some 7 million Americans are enrolled in flexible spending accounts across the nation with each account averaging $1,000 or so. Estimates say that about 3% of the money deposited is not used and therefore forfeited.

The advantage of the health care spending accounts is they allow employees to contribute pretax earnings from their paychecks each month that can be used toward non reimbursed medical costs. Since the money from this account is tax free, it avoids federal and state employment taxes which can save the account holders 30% or more on medical costs.

Despite the more than $200 million being forfeited, it's less than in previous years, This is because new rules for the accounts now allow people to use the money for over-the-counter drugs which makes it easier to spend the money at the last minute.




For more tax moves you should consider making before the end of the year, see our article 2004 Tax Deduction Moves For Saving Money