May 18,2005

Grassley Praises Decision to Give Employees More Time to Use Health Flexible Spending Accounts


To: Reporters and Editors
Re: Treasury Department announcement on “use it or lose it” rule for flexible spending accounts
Da: Wednesday, May 18, 2005

Today the U.S. Treasury Department announced it will allow employees to have more timeto use the money set aside for health care expenses in their flexible spending accounts. Sen. Chuck Grassley, chairman of the Committee on Finance, has long urged this change. Under current rules,millions of employees sign up for the accounts each year to use pre-tax dollars for medical expenses.

However, workers have to use the balance by the year’s end or forfeit the balance to their employers. As a result, people often rush to spend their balance and buy items such as eyeglasses – whether theyneed them or not – to use up their money. Today the Treasury Department announced workers willhave 2.5 months into the next year to use their accounts. Grassley made the following comment onthis development.

“This is great news for Americans struggling to keep up with rising health care costs. Theso-called ‘use it or lose it’ rule has discouraged millions of Americans from using flexible spending accounts. It’s caused millions more to waste or forfeit precious health care dollars. Workers shouldn’t have to lose money just because they’ve been lucky enough not to have a health crisis. An artificial deadline doesn’t make sense. I appreciate the Treasury Department’s response to myrequest to take a fresh look at this decades-old rule and put the word ‘flexible’ back into these plans.Americans need every possible tool to meet their families’ health care needs. I’m looking forwardto working with President Bush and my fellow senators to make health care more affordable byfurther improving flexible spending accounts, and by continuing to build on the success ofconsumer-directed health plans such as health savings accounts.”