New Law Changes Flexible Spending Plan

The new healthcare law has brought about some important changes in the flexible spending program. These changes could have a significant impact on your finances.

Flexible spending accounts can be used to keep pre-tax money for certain health care costs. You assess your health care needs and keep some money for the expenses. You can save about one-fifth of the costs in this way by using your pre-tax money. A flexible spending plan allows you to cover a number of health-related costs like over the counter medicines, sunscreens, eyeglasses, dental costs and so on.


The downside is that if you do not use your entire funds for authorized medical expenses, then you lose the benefit. There is no provision for carrying forward the remaining balance to next year. However, most companies give their employees three extra months and extension until March for spending that money.

Changes in Flexible Spending Program

The new law will not allow use of pre-tax money for over-the-counter medicines. This will reduce the number of options you can use that money for. Employers may put further restrictions. Many companies may exclude other expenses such as bandages and contact lenses, as they would not want to take the responsibility of determining which over-the-counter expenses are eligible and which are not. This would be a problem for people who need multiple over-the-counter drugs regularly for a chronic illness.

There would also be a new limit for employee contribution from 2013, which is much lower than what is currently allowed by many employers, though it is more than the present average contribution level.

The reason for these changes in the flexible spending program is that the new healthcare law provides for more budget-friendly and comprehensive health insurance coverage. Therefore, people would not need to rely so much on flexible spending money. Further, the extra tax received by the government would be used in developing health infrastructure in the country.

Impact of These Changes

These changes will not affect the majority of people, as only 27% of the eligible employees use this plan. The reason is that if the money is not used for qualified expenses, then the balance amount is lost. Those having a chronic illness and needing to spend on over the counter medical expenses regularly will suffer most, but the administration is hoping that the impact will be minimized through better coverage.

Super rich

Treasury Secretary Speaks on Urgent Financial Matters

Treasury Secretary Timothy F. Geithner recently spoke about some important financial issues on NBC’s Meet the Press. Here are his views on two issues that are likely to be in the news for the next few days.

Financial System Overhaul

Geithner reiterated that America needs some serious financial changes. The Democrats have introduced the financial reform bill, which is likely to ensure that there is a system for preventing future bailouts of financial firms if their failure will hurt the economy.

The legislation will also create a consumer protection agency at the Federal Reserve and will strengthen checks on hedge funds and the derivatives market. According to Geithner, it will prevent situations like the Lehman Brothers bankruptcy, which triggered a global financial crisis.

However, to bring the legislation in force, the support of both the parties may be needed. Currently, the legislation seems to be facing disapproval of the Republicans, with the Senate Minority Leader Mitch McConnell calling it a ‘bailout bill’. Republican lawmakers also believe that the government is merely supporting weak firms through this bill.

Geithner said that he is sure both parties will come together and pass the bill as he has gathered from his discussion with the Republicans that they are not totally against it. He also added that the government is not trying to bailout firms that have made wrong decisions, but merely trying to shield the economy from the impact of their failure. He said that a large number of people lost their jobs and houses because of the recession, and the political parties had no choice but to keep their disputes aside and work on effective financial reform.

He also clarified that taxpayers’ money will not be used for this purpose. Large financial firms will have to make payments in a fund that will be used for any government help in future.

Suit against Goldman Sachs

In the same interview, Geithner refused to make a statement about the suit that the Securities and Exchange Commission has instituted against Goldman Sachs Group Inc. He stated that the investigation is still going on and this was not the time to comment on the issue. He however emphasized on the need for a stronger system to protect Americans from misconduct on part of big corporations. The rules should not merely punish after the misconduct is done, but should be able to prevent these things from happening, he said.

Homebuyers Tax Credit Stimulus Ending Soon

Real estate agents and mortgage brokers have noticed a sudden increase in the number of people who want to buy a house. This is because the first time home buyer tax credit scheme is drawing to a close, and people have less than two weeks left to finalize their contracts for purchasing a house.
Many home buyers are rushing to finish all the formalities and documentation, even though the majority of people who wanted to avail of the tax credit have already purchased new houses. It is expected that activity in the home market will soar this month as first-time buyers and trade-up buyers race to meet the tax credit deadlines.

The details of the scheme

The home buyer tax credit was introduced by the Obama administration during the economic crisis to boost the real estate market. The scheme was extended in November and will now be closing by April 30th. If you want to take advantage of this opportunity, you should act quickly because a binding sales agreement would be required by April 30th to qualify for the cash loans. Further, you will have to make the purchase by June 30th. For current home owners, there is a tax credit of $6,500 for purchasing a new house, if they have lived in their current house for a minimum of five years.

Factoring in the recovery

Individuals earning up to $125,000 and couples earning up to $225,000 are eligible for the credit. Earlier, the limits were $75,000 for individuals and $150,000 for couples.

It would be interesting to see if the housing market is able to sustain itself without the stimulus package. The tax credit scheme had been a major factor in the recovery of the housing. It might have even had an indirect impact on other economic sectors. This is because various markets related to housing also benefited from this program.

There is still a chance of some other stimulus scheme by the government if the market falters. Many people are still wary of buying a house, as they are scared of being suddenly laid off and having to pay a huge mortgage loan.

Staying out of trouble

However, some real estate analysts say that prices will stabilize and the housing market will be able to stay out of trouble even after withdrawal of the stimulus package. They point out to the fact that a lot of expensive property is being sold currently and that not all deals are for first-time buyers.