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House Approves Working Families Assistance Act

On June 22, the House approved, by voice vote, a bill (H.R. 4372) to expand the use of flexible spending arrangements (FSA).

Sponsored by Rep. Eric Cantor (R-VA), the Working Families Assistance Act would allow employees to transfer up to $500 in unused benefits in a cafeteria plan or FSA to the following year’s FSA for dependent care assistance. Last month, the House approved a bill (H.R. 4279) that would allow employees to transfer the same amount of unused benefits to the following year’s FSA or to a health savings account (see The Source, 5/14/04).

Rep. Cantor explained that dependent care accounts “were created to assist families with two working parents to care for the young children or help these families who care for a disabled spouse or parent. These accounts allow up to $5,000 to be withheld pretax to help pay for this important care. Unfortunately, these accounts are not being utilized to their fullest extent. They were created in a use-it-or-lose-it fashion which often causes its users to underestimate the amount of money they need to put away, shortchanging the very people it was intended to help.”

Rep. Ben Cardin (D-MD) added, “The problem with flexible spending arrangements is that you have to determine at the beginning of the year how much money you are going to spend for dependent care. If you are wrong and you put away too much money, you lose that money. That is certainly a pretty harsh penalty for misjudging the amount of money that you will need for dependent care. And, therefore, this bill would allow a taxpayer to roll over up to $500 from one tax year to another. And it certainly makes sense to make this modification in our Internal Revenue Code.”

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