Healthcare FSA-be careful

[nairv]

Just wanted to let my BB friends know some important points about a healthcare FSA if you have one. I found some things out the hard way unfortunately.
My employer told me that the money allotted to the FSA at the beginning of the year is available to use all year, even if you terminate. That is not completely true. Yes, the money is there all year, but if you terminate, your card will be cancelled within a week. You can still submit paper forms, but you only have 90 days from your date of termination to submit them, AND the claims need to be for expenses that occurred prior to your termination date. Nobody is going to take the trouble to tell you this upfront.
This is probably in fine print somewhere.
So for any of you planning on starting an FSA-they are great while you are employed. But definitely think about the possibility of termination/resigning within the calendar year and whether you will be able to use up all those funds.
So, as you probably guessed, I did lose some money that I wasn't able to spend from my FSA. Well, at least I didn't pay taxes on that money.
Hope this helps someone.

 

[ColoradoDisneyFreaks]

On the flip side of this, if you have claimed more from your FSA than you have contributed so far for the year when you terminate, they don't come after you for the money.

 

[nairv]

That's a good point!
Why can't they put all this stuff in language people can understand and large enough print that you can actually read?!!
I should probably go through all my paystubs for the year and see how much money I actually lost. It may not be as bad as it looks.
Thanks for bringing that up!

 

[sydneysmom]

technically, you aren't "losing" the money in FSA. You haven't paid IN all the money to cover what was loaded onto your FSA card. the company pre-loads, say, $ 1000 in January. You're getting money deducted each week that goes towards "banking" that $ 1,000. So it's actually the company that is losing money if you terminate and use the full amount on the card.

If you "paid in" $500 towards the $1000 that's already loaded, but only used $100 on the card, then yes, you'll have lost $400 of what you already paid in. So unless your employer takes the full deduction from your paycheck on January 1 to cover what is loaded on your FSA card, chances are you're probably not losing the money, your company is.

 

[ragtopday]

technically, you aren't "losing" the money in FSA. You haven't paid IN all the money to cover what was loaded onto your FSA card. the company pre-loads, say, $ 1000 in January. You're getting money deducted each week that goes towards "banking" that $ 1,000. So it's actually the company that is losing money if you terminate and use the full amount on the card.

If you "paid in" $500 towards the $1000 that's already loaded, but only used $100 on the card, then yes, you'll have lost $400 of what you already paid in. So unless your employer takes the full deduction from your paycheck on January 1 to cover what is loaded on your FSA card, chances are you're probably not losing the money, your company is.

This sounds more like an HSA, which is different from an FSA. In an FSA, all the funds come from the employee and must be used in the current calendar year. An HSA, which is a companion to a high deductible health plan, is actually good for life, and many companies (including mine) do "load" it with money as an incentive.

To the OP - I'm sorry you're out some money, but thanks for alerting others!

 

[sydneysmom]

This sounds more like an HSA, which is different from an FSA. In an FSA, all the funds come from the employee and must be used in the current calendar year. An HSA, which is a companion to a high deductible health plan, is actually good for life, and many companies (including mine) do "load" it with money as an incentive.

To the OP - I'm sorry you're out some money, but thanks for alerting others!

No, I'm talking about an FSA where the funds come from the employee. Our employer "fronts" the money directly to the credit card ( we have Wage Works) so for example, they load $1000 for me. Well, each payroll, $20 is deducted from my paycheck to go towards that $1,000 that the company has fronted by loading my card. ( I don't write a check to our company on January 1 so they can load my card.)

Now, if I quit in June, I have only actually paid out of pocket $500.00. (but the company has loaded the FULL $1,000) I can spend the entire $1,000 but 1/2 of that isn't what I have put in for this amount. Does that make sense? If the company is pre-loading and the employee is paying it weekly, then you're not "out" that money if you quit. You're only out the difference of what you actually put into it and what you actually spent.

Part of my job is auditing the FSA healthcare to see how many employees, who were terminated or quit, have used the entire amount of their FSA vs. how much they've contributed. usually, it's the company that loses the money.

 

[bumbershoot]

No, I'm talking about an FSA where the funds come from the employee. Our employer "fronts" the money directly to the credit card ( we have Wage Works) so for example, they load $1000 for me. Well, each payroll, $20 is deducted from my paycheck to go towards that $1,000 that the company has fronted by loading my card. ( I don't write a check to our company on January 1 so they can load my card.)

Yes, I agree.

We opted to put something like $1600 on our FSA. It's all there for us to use right now. But it's taken out bit by bit, $1600/12 months, through the year. Should something happen right now, they wouldn't take the rest of the $1600 we haven't paid out of the final check, and yet we could use that money just before the last working day and still get reimbursed.

 

[radmom]

Layoffs also factor into FSA accounts. My husband works for a company that has temporary layoffs. I have to be careful to not take kids to doctor,dentist or get prescriptions filled during any layoff week. The FSA will not pay for any charge accrued the week he is on layoff. This can be quite a pain, have had to cancel checkups numerous times to avoid this. However, I think FSA's are wonderful to have. They are a lot of work at times (all the receipts,etc) but definitely worth it.

 

[puffkin]

Yes I agree with the PP's. The entire balance is available to you immediately, but you are "funding" it through the year. So when you terminate the company may actually lose money on you if you have spent more than you contributed to that point.

Note though that Flex Spend accounts for Dependent Care expenses are different. Those you can only get back the funds equal to what you contribute to that point. It makes the first two months of the year VERY difficult for us as we are almost paying double daycare those months until we can make our claims.