Employer wants to discountinue unreimbursed medical FSA. Now what?

[Guest benefitsnerd]

Question: A white coller employer (roughly 100 employees) wants to discontinue their unreimbused medical FSA because employer isn't comfortable with the $ exposure. Other then lowering the limit, what if any alternatives does the group have. If they take away the medical FSA altogether, is there something else employer could offer to those employees that would achieve the same or comparable pre-tax benefit?

[E as in ERISA]

Do they have a high-deductible health plan? What about facilitating the new health savings accounts, which are individual accounts similar to IRAs so there is not the liability for the employer.

[papogi]

Do they typically have forfeitures at the end of each year (that is most often the case). The risk to employers in offering FSA's, when they know all the positives, usually outweigh the negatives. Employers get the benefit of savings on payroll taxes, they shift some responsibility of care onto the employees, they can say that this is yet another benefit offered to their employees (for recruiting purposes) and they can allow forfeitures to offset plan costs.

They could place limitations on the reimbursements available in the plan. For example, they could specify that this is only for dental and vision expenses. I'm not sure that's a great idea, however, since those particular expenses are some of the more predictable ones for employees (easy to set up appointments just prior to leaving a company).