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Self-satire at the IRS? May 5, 2006

Posted by federalist in Open Questions.

Why have Health Savings Accounts and Flexible Spending Accounts been structured with such onerous and convoluted provisions? IRS Publication 969 almost seems like satire.

I.e., given that an employer can buy health services for employees with pretax dollars:

  1. Why does an HSA require that the taxpayer have no low-deductible health insurance?
  2. Why must a FSA be funded ahead of time? I.e., why does the taxpayer have to guess a year in advance what his covered expenses will be?
  3. Why are unspent FSA balances forfeited after a year (or now a year and 75 days)?
  4. Why are self-employed individuals excluded from the tax benefits of HSA’s and the even more attractive Health Reimbursement Arrangements?


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