The health care reform bill recently signed into law by President Obama limits an IRS program that savvy couples use for an interest free infertility treatment loan. Beginning in 2013 the maximum contribution for a flexible spending account for medical expenses will be limited to $2,500. Until then employer-set limits allow couples to take much bigger interest free employer loans to pay for IVF and other infertility treatments.
A flexible spending account is a key tool for couples trying to conceive. Most infertility treatments are self paid: the majority of group health insurance plans provide little or no coverage for these procedures, leaving couples with lots of un-reimbursed medical expenses. A flexible spending account provides the best tax savings, and an often overlooked loan feature. But the loan feature will lose it's appeal in 2013, so move fast if you are looking at IVF or other infertility treatments.
A flexible spending account (FSA) provides immediate tax savings for un-reimbursed infertility expenses. You use pre-tax dollars to pay for fertility drugs, diagnostic testing, IVF cycles, etc. Anything not covered by insurance can be paid for using this account. Unlike taking the deduction at the end of the year on IRS Form 1040, a flexible spending account has no itemized deduction threshold, so your tax savings are much better.
Flexible spending accounts also provide an employer sponsored loan. Up until 2013, your employer sets the amount you can contribute into your FSA. Some set small limits, while others allow up to $10,000 or more. The key feature is that your employer must immediately reimburse any qualifying expense, no matter what you have paid into the account.
For example, suppose in December you elect to contribute $10,000 annually to your FSA because you are planning to undergo IVF in January. Your company's FSA plan year begins January 1 of the new year. Your employer funds the full FSA election in January because you had a qualifying expense. You then have eleven months to repay your employer via pretax payroll deductions. Your just got an interest free loan that actually cut your IVF costs by one third or more depending upon your income and tax status.
However, beginning in 2013 this option will not be as appealing. The health care reform bill will limit the amount you can contribute to $2,500 per year. Given the costs for just one IVF cycle, a flexible spending account won't help as much as before. Take advantage of your FSA while you still can.
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