But apparently Uncle Sam’s costs could be higher if more employees took advantage of additional workplace offerings.
Take flexible spending accounts, or FSAs, for example. These are a great way to stash money before taxes are taken out. That means that less of your paycheck is subject to the Internal Revenue Service’s sticky fingers.
Then you get to use that untaxed money to pay for things such as child care or medical costs that aren’t covered by your medical insurance, another tax saving for you.
However, the American Payroll Association has found that employees aren’t using flexible spending accounts.
According to the organization’s 2011 version of its annual “Getting Paid In America,” only 12 percent of employees contribute $2,500 or more to their company’s FSA.
That result is surprising, says the payroll group, considering data from the Kaiser Family Foundation and the Health Research and Educational Trust indicating that workers on average in 2010 paid nearly $4,000 toward the cost of family health coverage.
The payroll survey asked, “Did you contribute more than $2,500 last year to your medical flexible spending account?”
Only 12 percent said yes. Another 39 percent contributed to an FSA, but less than $2,500. Then there was the 46 percent didn’t participate in an FSA at all.
“While health care costs are a big concern for employees and their families, the survey results clearly show they aren’t taking full advantage of FSA plans,” said Dan Maddux, executive director of the American Payroll Association. “Employers should encourage employees to take advantage of these and other pretax, voluntary payroll deductions to ease the burden of these anticipated expenses.”
There’s one minimally positive note from the survey and the low FSA participation.This year the poll used $2,500 as the contribution cutoff. Currently, there’s no statutory limit on the amount a worker can put into a medical FSA, but most companies use a $5,000 maximum.
Come 2013, there will be a new lower limit on contributions to the medical accounts. You guessed it: $2,500.
Since most people aren’t maxing out their FSAs now, that upcoming $2,500 limit won’t be a major problem in a couple of years.
Does your company offer flexible spending accounts, sometimes also called flexible savings accounts? Do you participate? Do you plan to open an FSA this benefits enrollment season? If not, why not? I’d love to hear why you aren’t taking advantage of this tax break.
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