Today’s Wall Street Journal has a very good article on a growing trend of companies offering debit/credit cards for their flexible spending account and health reimbursement arrangements: “Employers Offer New Pretax Perk: Debit Cards Allow Instant Access to Accounts for Medical Fees and Commuting Expenses.” (Subscription required.) The article reports that “[c]urrently, less than 400,000 people have flexible spending accounts with debit cards” but that the “Consumer Driven Market Report, a newsletter covering health-care financing, predicts that number will jump to 1.5 million by next April.” As you may recall, the IRS issued Revenue Ruling 2003-43 back in May sanctioning these types of arrangements.
Quote of Note: “But employers have a good reason to encourage workers to set up flexible spending accounts. The accounts reduce the taxable income of employees, which reduces the amount of money employers have to lay out in payroll taxes to fund Social Security and Medicare. Evolution Benefits Inc., Avon, Conn., which markets a debit card called the “Benny” card, reports that one of its customers generated more than $225,000 in additional tax savings during its first year of offering employees the debit card.”
Read more about these types of plans in previous posts at Benefitsblog which you can access here and in this post–“From My Notes: Harry Beker and Kevin Knopf Speak on FSAs and HRAs at the Mid-Atlantic Area Employee Benefits Conference.”