I was wondering if anyone has experience with Health Flexible Spending Accounts. I don't want to ask my HR department/employer for obvious reasons. If I allocate a certain amount, say $1,000 for 2012 to my FSA and spend it all in January, but then I quit the job in June, am I responsible for paying back any/all of that allocation? If I only spend $500, can I still request reimbursement from that account for the remainder even if I don't work there anymore? Any info would be greatly appreciated!
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don't quote me on this, but i believe it's the company's loss if you spend the $1,000 and they haven't recouped it from you. same as it's their gain if you don't use it all.
i highly doubt you can get "reimbursement" for the remainder. people i know buy tons of contact solutions, etc. at the end of the year because they can't get their money back.
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I have one and I'll be giving it up halfway through the year for my husband's PPO plan.
Let's say the total amount you are allowed by law to put in is $3000 (I know it's somewhere around there, we'll use this since it's an even number).
If you put in $3000, that money is yours to keep. it will never be your company's money. Since you only had the HSA for 6 months, the IRS may come after you for taxes on half of that.
If you just put $1000 into your HSA and you have your HSA for 6 months, you have nothing to worry about.
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@mediagirl: good to know. but i do know fsa is use it or lose it. so i don't think you can get your money back. and you have a deadline to use the money by.
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Ah...sorry - I thought she meant she had a HSA, not a FSA. For an FSA, I'm not sure. I would try calling your insurance company and asking them...that way you bypass your HR department.
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You should ask an HR rep at your work.
The company I used to work for I know they took the hit. They used ceridian benefits and you could continue using your ceridian card after you left if you still had money on it.
I know some other companies will make you reimburse them for whatever you haven't technically paid for yet.
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@tequiero21: I 2nd your reply. One of my friends used to work in labor relations/HR for my former company, and he told me it's the company's loss. So if you have an FSA for $5k, get Lasik done on Jan 2, get reimbursed and quit Feb 1, you're in the clear.
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My husband and I both switched jobs mid year. I had not used all of mine. It was still mine to keep and use for the rest of the year.
DH was over his by $50. We had to pay it back. If you don't pay it back they will send it to collections just like any other debt.
So I don't think you're in the clear. Maybe it varies by employer or state??
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I was the in-house payroll person in charge of this at a previous company, and it's a use it or lose it system, so you will have to pay. We had it set up so that the employee would commit to an amount they wanted to put in at the beginning of the year, divided by each of the 26 paychecks per year, so a little would come out of each check. If they for example committed to $1,000, roughly $40 would come out of each check. If that person quit halfway through the year, the remaining $500 would come out of their last check.
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I'd either look online or call the company that administers the plan. We had another company that administered it for us.
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There is not one answer to this question. It is an employer decision (even the administrator won't be able to answer your question). The company I am at currently doesn't pursue the difference and takes the hit. My former employer did not take the hit and took the difference from your final paycheck. I've also had a state government job where the government took the hit. It truly varies by employer.
Also, it is not typically outlined clearly anywhere (especially if the employer takes the hit). You typically find out by asking the direct question or quitting and dealing with whatever the consequences are.
HSA was also mentioned in a reply - it's a completely different ballgame from a FSA.
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I work with FSA accounts every day. The Flex is a use it or lose it. You are only entitled to that money while you are an active employee of that company. You can use the entire $1000 the first day of the year and even if you were to quit mid way through they can not come back and have you repay it. That's covered under the Uniformed coverage Law.
You can normally submit claims towards the remaining balance even after you leave the company as long as the services were incurred while you were an active employee. Most employers have a certain amount of time after a termination date that they allow you to claim services for reimbursement.
You don't have to call your HR dept because most likely they won't really know. Call who ever is the Third Party Administrator for the FSA account. -
@MamaG: I have to disagree. FSA accounts are federally mandated and the rules are the same for all. The company can NOT come back at the employee for the difference of monies spent and monies contributed.
It is against the law. -
@Crisark: They can come after you for the money since they have to pay the third party until the end of the year. I know people who had what was left of their FSA contributions taken out of their final check (but if they hadn't spent all of the FSA they could continue to use it until the end of the year).
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So if you chose to have a $1000 FSA and got paid twice a month you would be contributing roughly $40 per paycheck. If you quit after only 5 paychecks YOU have only paid $200 towards the $1000 account, although you have access to all $1000 of it. Even though you left, the company is still required to pay out the remaining $800 to the third party they have chosen to use.
Some companies will count their losses and not put the time and energy into figuring out how much you owe and you basically get an $800 bonus that you can use or not (and it'll get forfeited at the end of the year just like any FSA) other companies will require you pay them the remaining $800 either by deducting it from your final paycheck or making you right them a check.
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@Navy_Mommy: Not if it's a Federal FSA account. This is what I do for a living. I know for a fact there is a law against it.
There may be different kinds of FSA accounts. Just like the ones we administer, if they don't use all of their money we as the TPA do not collect that money. It is forfeited to their employer.Not everything you are saying is correct based on the Section 125of the IRS.
"An employee does not continue to contribute to the plan upon termination of employment. Thus, one could use the entire amount on day one of the plan year, terminate employment on day two of the plan year, and contributions would have been none or negligible (e.g., perhaps 1/26 in the case of biweekly contributions). The "free" money is not taxable. The reason for this is that the IRS views these plans as health insurance plans for tax purposes.[8] According to IRS section 125, benefits received from a health insurance plan are not considered taxable income.The same reasons that make pre-funding a possible benefit to an employee participating in a plan make them a potential risk to employers setting up a plan. The employer has to make up the difference that the employee has spent from the flexible spending account but not yet contributed if other employees' contributions do not account for the money spent. The amount the employer loses due to pre-funding may eventually be partially, totally, or more than made up by employees that do not spend all of the money in their FSA account by the end of the plan year and grace period."
"
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Thanks for all of your answers. I don't really want to go to my HR administrator because I don't want anyone to know that I may be thinking of leaving the company sooner rather than later!
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@Crisark: I know more than one person who had to repay their employer (who worked for different companies). They HAVE to be "federal" FSAs in order to be taken from your pay pre-tax, there aren't other kinds.
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Navy_Mommy-It's called the Uniform Coverage Rule. The employer cannot come after you for the difference. Whatever you elect from the beginning you have access to. So say you elected $5000 for flex and only contributed $2500 mid year and leave the company. If you have the expenses from your start date to your end date, you can claim up to the $5000. If your employer comes after you for the difference, they can be sued because the IRS says that you can claim the whole amount even if you don't contribute.
The reason why they can do this is because the employers are not constantly losing money. So if someone spends more than they contribute and leave the company that's okay because on the other hand, someone can elect $5000 and only spend $2500 and lose the other $2500 that goes back to the employer.
If you know someone that had to pay their employer back, let them know that they need to file a complaint with the IRS.
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@Miss Adia: Thank you much!
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@Navy_Mommy: What I meant by "Federal" was that there are employer based cafeteria plans that are not through the government.
My wording may not have been correct. I apologize. -
@Miss Adia: They were able to use the rest of the account though. So, if they had $1000 left they could continue to claim expenses against it - even after their end date.
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@Navy_Mommy: They are able to do that through a COBRA plan extending the benefits or with in a 90 day grace period after the termination date.
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But employer based cafeteria plans are not FSA's. They may call them FSA's to not confused employees but they don't follow IRS guidelines. I'm not sure what other plan employers offer besides HSA, FSA, MRA, and HRA. but HRA and MRA are accounts that employees don't even pay into. So I don't know what kind of FSA that an employee may have to pay back.
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Navy-They may have signed up for COBRA to continue the flex dates.
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ERINPYE-I'm quite surprised that your company even gets away with this.
The only way that this is okay if the employee agrees to fully fund the account and they are given the rest of the plan year to incur expenses.
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When I left my job in July i didn't have to reimburse it but I have till the end of the year to use the rest of it.
And the people I know who had to repay it had the same situation @erinpye: described. I really don't think its illegal otherwise it wouldn't be as common as I know for a fact that it is.
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Oh, and I didn't have to sign up for Cobra to extend mine.
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I'm telling you, something is not right. These employers who are trying to get their money back can be audited by the IRS.
See prop reg 1.125-1 Q 7: FSA will not qualfiy for tax favored treatment under IRC 105 or 106 if the effect of the reimbursement arrangement eliminates substantially all of the risk of loss to the employer maintaining the plan. Which means that if there is no employer risk they lose the tax favored treatment. There has to be a risk for both employer & employee. The employees risk is that they dont use the entire amount of annual contribution & the employers risk is if the employee leaves & has used more than they have contributed.
So if the employer is collecting money from people who overspend, then there is no risk.Also see: Flex plan regulations require that Medical/Dental/Vision Care FSA benefits be available in the full annualized amount anytime during the plan year.
An employee who contributes $100/month can therefore be reimbursed for up to $1,200 of eligible expenses anytime during the plan year.
It is possible for an employee to terminate with a negative Medical FSA account balance. The IRS places this risk upon the employer, in the same fashion as the employee bears the "Use It Or Lose It" risk. Employers cannot recover this deficit from the final paycheck, or take any other recovery steps.
Employers control this risk by placing a maximum on allowable Medical FSA contributions.
What about the occasional terminating employee who wishes to repay an "overdrawn" account? The employee can elect COBRA, and continue monthly (non-deductible) Medical FSA contributions until the account is reimbursed for benefits paid.
http://www.probenefits.com/pub/faq/Question.html?id=128&back=/Participants/Flex-Q-and-A.htmlSo if any of you have had to pay back a FSA account, I would report it. Your employer cannot do it. No matter how they try to spin it, they cannot.
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@Navy_Mommy: I suppose we would all have to agree to disagree.
You can reference Section 125 on the IRS.GOV website for all the the laws and regulations for a true FSA account.
Some companies will assume the name as to not confuse their employees but may not be offering the exact FSA that is under federal guidelines.
As @Miss Adia: and I work with this in our line of work daily I can assure you of the info above to be true,... -
@Miss Adia: Quit posting a minute before me lol *GET OUT OF MY HEAD* haha
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Question, Miss Adia - I recently lost my FSA benefit since I changed my status to only PRN (working twice a month). They offered me COBRA coverage since my account was underused. The letter I got made it sound like if I spend more than my premiums, I will have to reimburse my company. However, the third party employee I talked to made it sound like I can spend all the remaining balance upfront if I want, only have to pay one month of premiums, and then my company would eat the cost of the additional premiums that I would no longer pay once I cancel COBRA coverage. That sounds great to me, but I would hate to do that and then find it isn't true since the letter they sent sounds like I will need to reimburse my company.
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