Congressional Democrats may have intended their health care overhaul to benefit society's least fortunate, but one of several new Obamacare taxes imposed on the middle-class adversely affects America's most vulnerable: disabled children.
What some are calling a Special Needs Kids Tax is a new $2,500 annual cap on the amount of pre-tax income employees are allowed to deposit into their flexible spending accounts (FSAs). These are special medical savings accounts offered by some employers, which workers typically draw from to supplement the benefits they receive from traditional health insurance.
The accounts are subject to a use it or lose it rule: employees must spend whatever is in their account by the end of the year, or the funds revert back to their employer. Before Jan. 1, there was no federal cap imposed on how much of their paychecks employees were allowed to have deposited into their FSAs, though employers themselves were permitted to impose caps. That changed in January, and employers are still allowed to cap it even further.
This won't affect most people, who might deposit only $10 or $20 a pay period into their FSAs, Ryan Ellis, tax policy director for Americans for Tax Reform (ATR), tells Sunshine State News. But there's one group that it really does affect: parents with children of special needs, especially autism or Down syndrome.
That's because several parents of mentally or physically disabled children have used their pre-tax FSAs to subsidize tuition at their kids' special needs private schools; that tuition qualifies as a medical expense under IRS rules.
A lot of parents would run that tuition, to the extent that they could, through their FSA at work, in order to make that tuition a tax advantage for them, Ellis explains. They were putting $5,000 or $10,000, if they could, every year just so they could try to make this tuition. Now, they can't do that.
Deborah Linton, executive director of The Arc of Florida, an organization devoted to supporting people with intellectual disabilities, agrees the new FSA cap will not serve the disabled well.
Many of our members are parents of children with special medical needs; if your private insurance is insufficient or if you don't have insurance, it certainly is advantageous to be able to use [FSAs] to meet their needs, definitely, she tells SSN. If you have a child who is medically fragile or very medically involved, $2,500 isn't a lot of money when it comes to medical needs. A higher cap would have been nicer.
Ellis who points out that the new cap is an effective tax increase on families whose income is less than $250,000, in violation of President Obama's repeated tax pledge says disabled children are a casualty of the carelessness with which Obamacare passed the U.S. Congress.
I wouldn't ascribe malicious intent at all on the part of the writers of this, he says. I think this is just one of those things ... it was rushed through the Senate in the middle of the night near Christmas [in 2009], and nobody thought about the second-order effects.
Reach Eric Giunta at egiunta@sunshinestatenews.com or at (954) 235-9116.
