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Flexible Spending Accounts for medical costs - use it or lose it?
Posted on 11/13/23 at 11:38 am
Posted on 11/13/23 at 11:38 am
Let’s say you have money (that you contributed/had deducted from your earnings) leftover at year’s end. Investopedia says you must ‘use it or lose it’.
If it’s not spent, where the hell does it go? Is it confiscated somehow? Does it disappear? This doesn’t make sense to me and I’m curious if maybe you just have to pay taxes on it and can cash it out somehow. Anyone have experience with this? TIA
If it’s not spent, where the hell does it go? Is it confiscated somehow? Does it disappear? This doesn’t make sense to me and I’m curious if maybe you just have to pay taxes on it and can cash it out somehow. Anyone have experience with this? TIA
4
Posted on 11/13/23 at 11:46 am to Nature Boy
Your company will claim it as other income once the grace period ends.
Posted on 11/13/23 at 11:58 am to Nature Boy
It is pretty frustrating how this system works. It's like they make you forfeit your leftover money, that should be YOURS, because it is too inconvenient to get the money back to you and remove taxes from it. It shouldn't be like that. Just let me charge all my medical expenses until I hit my max allowable for the year, then reimburse me.
Posted on 11/13/23 at 12:11 pm to Nature Boy
Why would you choose an FSA over HSA? Just what the employer offers?
This post was edited on 11/13/23 at 12:12 pm
Posted on 11/13/23 at 12:23 pm to WhiskeyThrottle
quote:
Why would you choose an FSA over HSA? Just what the employer offers?
Some health care options won't allow an HSA.
I have an HSA for healthcare, but an FSA for dependent care(after school, camps, etc) for my kids. You can deduct up to $5k a year in taxes using that.
After being passed around and around at Optum, I finally got someone to tell me that apparently my payroll dept took one too many deductions from my paycheck in 2022 and I have $192 sitting there that I can't get to. I just reached out to my payroll to tell them, so I'm hoping they'll get it back to me, but it's been a pain trying to figure out why they wouldn't reimburse me that last amount.
Posted on 11/13/23 at 12:26 pm to WhiskeyThrottle
No one that qualifies for an HSA would.
Posted on 11/13/23 at 12:57 pm to Nature Boy
It was explained to me this way:
The full yearly FSA money is available on day one. Therefore there is a risk to the company if you spend more FSA money than you contributed (and then leave the company). The forfeited money the company collects offsets the money they lose. Hope that make sense.
The full yearly FSA money is available on day one. Therefore there is a risk to the company if you spend more FSA money than you contributed (and then leave the company). The forfeited money the company collects offsets the money they lose. Hope that make sense.
Posted on 11/13/23 at 1:29 pm to CoolHand
quote:
The full yearly FSA money is available on day one. Therefore there is a risk to the company if you spend more FSA money than you contributed (and then leave the company). The forfeited money the company collects offsets the money they lose. Hope that make sense.
This, the reason the FSA is use it or lose it every year is because it's a big risk on the balance sheet for every company. You can use 100% of the funds (which the company covers) from day 1 and then each paycheck they take back equally throughout the year. If you leave the company mid-year and used all your FSA money, the company gets a negative hit there. This is why if you dont use your funds all in the year the company keeps it to in theory offset people who make have left and used more than what was collected.
My company doesnt offer any FSAs for this reason, but does offer an HSA with the HDHP at least. The HSA money your company puts in is way less of a risk since they can do it as they wish rather than front a bunch of it from day 1.
Though I still wish we had a dependent care FSA so I could at least send $5k of my money tax-free to pay for daycare
Posted on 11/13/23 at 8:50 pm to CoolHand
quote:
The full yearly FSA money is available on day one.
True. I signed up for max contributions one year and withdrew the entire amount in January to reimburse for a big planned expense. Had not put in 10% of that amount at the time.
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