Flexible Spending Account

[njverifier]

Dear Members,

I was trying to understand how FSA works. I went through all the literature regarding this but I still had a doubt. Anyone who has experienced this please post your comments. Here is a scenario:

1. Signed up for Helth Care FSA for $1500 during open enrollment
2. Contributed about $350 so far
3. Incurred $1000 eligible expenses till date
4. United healthcare paid $1000 till date

All is well so far. I could get back the money even before I could contribute . Now if I decide to change employers and if the Health care providers are different for example old employer has UHC and the new employer has Blue shield. How will the FSA get settled with the old employer? How can I carry forward the FSA to my new employer as we are in the middle of the year.

1. Will my old employer deduct the remaining amount i.e. $1150 from my final paycheck and deposit in the FSA account? I would then claim the remaining as and when I incur the eligible expenses?

2. Is there way to transfer the FSA details to new employer so that the new employer will start deducting the amount on per pay period basis?

I am so confused. I tried to reach out to my benefits coordinator but haven't heard anything so far.

Any inputs are greatly appreciated.

[MahaBharatGC]

Flexible Spending Account regulations are defined by IRS as it has tax implications.
Now regarding your intriguing questions, I am not sure 100% but would like to take some guesses as I just had a talk with my benefits coordinator.

1) If you change your provider (health care provider) due to employment change or other reason, I believe they will definitely send you bill for the amount they paid (extra) than what you had contributed so far...
2)Every time, you change, you have an option to 'change' fsa contributions..so, it is not about 'transfering' but your annual cap set by IRS matters

[njverifier]

Originally Posted by MahaBharatGC

Flexible Spending Account regulations are defined by IRS as it has tax implications.
Now regarding your intriguing questions, I am not sure 100% but would like to take some guesses as I just had a talk with my benefits coordinator.

1) If you change your provider (health care provider) due to employment change or other reason, I believe they will definitely send you bill for the amount they paid (extra) than what you had contributed so far...
2)Every time, you change, you have an option to 'change' fsa contributions..so, it is not about 'transfering' but your annual cap set by IRS matters

Just curious what tax implications will it have? You either use it or lose it. Your health care provider determines whether the claim is eligible or not. If it is eligible and you still have balance left in FSA you will get paid. And any unused balance left out in the account at the end of the year will be lost(free money to uncle SAM). Looks like pretty straight forward to me. Any thoughts?

[MahaBharatGC]

Your FSA monthly contributions are pre-tax deductions so, that is the tax benefit.

Yes, if you do not use it, Uncle Sam gets all

The thumb rule is that it is not worth contributing to FSA if you are not having any treatments or surgeries or expecting baby in this country...

[frustratingGC]

You can use the amount fully, your employer legally cannot claim, that's reason employers have limit like 5K, 3K. When you end the employment FSA also ends, you cannot transfer...Also, if you contributed more than you spend and leave the employer, you can opt for COBRA insurance and use your contribution amount.

Originally Posted by njverifier

Dear Members,

I was trying to understand how FSA works. I went through all the literature regarding this but I still had a doubt. Anyone who has experienced this please post your comments. Here is a scenario:

1. Signed up for Helth Care FSA for $1500 during open enrollment
2. Contributed about $350 so far
3. Incurred $1000 eligible expenses till date
4. United healthcare paid $1000 till date

All is well so far. I could get back the money even before I could contribute . Now if I decide to change employers and if the Health care providers are different for example old employer has UHC and the new employer has Blue shield. How will the FSA get settled with the old employer? How can I carry forward the FSA to my new employer as we are in the middle of the year.

1. Will my old employer deduct the remaining amount i.e. $1150 from my final paycheck and deposit in the FSA account? I would then claim the remaining as and when I incur the eligible expenses?

2. Is there way to transfer the FSA details to new employer so that the new employer will start deducting the amount on per pay period basis?

I am so confused. I tried to reach out to my benefits coordinator but haven't heard anything so far.

Any inputs are greatly appreciated.

[njverifier]

Originally Posted by frustratingGC

You can use the amount fully, your employer legally cannot claim, that's reason employers have limit like 5K, 3K. When you end the employment FSA also ends, you cannot transfer...Also, if you contributed more than you spend and leave the employer, you can opt for COBRA insurance and use your contribution amount.

You are absolutely correct. I just got an email from my benefits coordinator and they said the samething, since my payments are more than actual contribution I'm at profit .

[MahaBharatGC]

Originally Posted by frustratingGC

You can use the amount fully, your employer legally cannot claim, that's reason employers have limit like 5K, 3K. When you end the employment FSA also ends, you cannot transfer...Also, if you contributed more than you spend and leave the employer, you can opt for COBRA insurance and use your contribution amount.

You are correct on the limits/cap. I was confused between HSA and FSA. Anyway, whichever you do, it just does not make sense to contribute if you are not going to expect so many medical procedures. These are good for planned procedures which is what I have learned so far here.

[Project_A]

Even if you do not have major planned expenses, you can still use FSA funds for dental/vision related (for self/ dependents) – note that prescription glasses in the US are expensive. FSA can be used for covering all medical expenses including co-pay/co-insurance/deductibles/office visits/medicine. If you can come up with a good estimate – FSA (requires one year prior estimate) is definitely a good option. I belive there is an upper limit of 3K/5K, but usually 1K or 2K (depending on need) would be good enough unless there are major medical expense is anticipated in the following year. Also FSA allows for 3 month window following the calendar year – providing a total of 12+3 = 15 month benefit.

[njverifier]

Originally Posted by Project_A

Even if you do not have major planned expenses, you can still use FSA funds for dental/vision related (for self/ dependents) – note that prescription glasses in the US are expensive. FSA can be used for covering all medical expenses including co-pay/co-insurance/deductibles/office visits/medicine. If you can come up with a good estimate – FSA (requires one year prior estimate) is definitely a good option. I belive there is an upper limit of 3K/5K, but usually 1K or 2K (depending on need) would be good enough unless there are major medical expense is anticipated in the following year. Also FSA allows for 3 month window following the calendar year – providing a total of 12+3 = 15 month benefit.

Very true I will give 100 greens for this, my sister educated me on FSA. I actually contributed only $500 initially as my wife was due in May, but I had unexpected dental expenses and also learned in the meanwhile that co-pays and even prescription medicines are covered. Then when I had a baby I bumped it up to $1500(you need to have a qualifying life event to change contributions). So far I contributed only $375 but I got $1000 paid by FSA(I signed up for automatic payment into my savings account). Now I am ready to leave my employer and I don't have to pay back the $625, it's covered by my employer. If you have kids and/or have dental/vision related expenses this is a very good option to save on the taxes. Even though it is a small amount it counts. Just don't have to pay uncle sam my hard earned $$$ because I am lazy to manage my expenses.