On March 14, 2023, the Personal Health Investment Today (PHIT) Act was reintroduced to the U.S. House of Representatives and the U.S. Senate. In The act was originally introduced to the House of Representatives and passed, as part of the Restoring Access to Medication Act of 2018, but Congress adjourned before the Senate could vote. For the bill to become a law, the act would have to pass both the house and senate again.
The PHIT Act would allow individuals to use their Flexible Spending Accounts (FSA) and Health Savings Accounts (HSA) for physical activity, including, but not limited to gym memberships, sports and exercise equipment, fitness classes, and youth sports league fees. Participants can contribute to these accounts pre-tax, which is beneficial for the consumer as the funds are contributed directly from each employee paycheck before federal income and employment taxes are applied. Currently, participants can use their FSA or HSA to purchase over the counter medications and products, eyeglasses and contacts, alcohol or drug treatment, and numerous other health-related items. It may come as a surprise that the FSA or HSA can be used to pay for weight-loss programs, but only if the account holder has been diagnosed with obesity, high blood pressure, or heart disease. While these individuals can pay for the weight-loss program with these funds, they are still not allowed to use their FSA or HSA to pay for a gym membership, fitness classes, or any exercise equipment that further help them meet their weight loss and wellness goals.
In 2023, the maximum amount individuals can contribute to their HSA for self-coverage is $3,850 and $7,750 for family coverage. These limits will be increasing in 2024 to $4,150 and $8,300, respectively. The HSA allows participants to rollover any unused balances, However, the FSA is subject to the “use it or lose it” rule. In 2023, the maximum amount individuals can contribute to their FSA is $3,050, which is not expected to increase in 2024. The FSA allows individuals to carryover up to, but not more than $610. Money.com completed an analysis regarding the amount of money that was forfeited back to the employer when it was not used by the employees by the spending deadline, March 15, and the results were astonishing.
It was found that more than 40% of people who contribute to an FSA forfeited a portion of their contributions, losing on average roughly $339 to $408 in a year. In total for 2019 and 2020, it is estimated that FSA contributors forfeited $3 billion and $4.2 billion, respectively, amounting to $7.2 billion forfeited back to employers over the two years.
As previously mentioned, if the available funds in the FSA are not used by the spending deadline, the funds are forfeited to the employer. Some employers, however, will offer employees a 2 ½ month grace period to spend the remaining balances. If given this grace period, it could still be difficult for employees to use the remaining funds as they may not need to purchase any health-related items, or the products they do need may not cost as much as the remaining balance the employee needs to use or forfeit.
The PHIT Act would expand the list of expenses that are eligible to be paid for through the FSA and HSA, which would help individuals spend their account balances without forfeiting funds. After comparing numerous gyms, it is noted that Planet Fitness appears to have one of the cheapest membership fees, offering two different plans. The first plan costs $10 per month, which allows members to work out at one location. The second plan costs $25 per month, but members can visit any location and take advantage of many other member perks. Other gyms can cost up to a few hundred dollars per month for membership fees, classes, trainers, and other benefits that could better assist with weight loss and fitness goals. For individuals who are living paycheck to paycheck or struggling to make ends meet, being able to use contributed funds from an HSA or FSA would make working out with proper equipment and guidance more accessible and would promote public health.
While the thought of losing contributed funds can be a deterrent to participating in an FSA plan, it is important to note there are some great tax benefits. The contributions made reduce an individual’s taxable income dollar for dollar, which could outweigh losing the remaining account balance not spent. For individuals anticipating incurring a lot of medical expenses in the upcoming year, contributing to an HSA or FSA is something consider, but you should plan to contribute and spend the appropriate amount of money so as not to forfeit any funds.
Authors: Ryan Levin, Team Leader, Fitness and Wellness Services | [email protected] and Ashley Redfern
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