I was laid off from my position the last day of April. I had an FSA (Flexible Spending Account) into which I had contributed about $250. This is money that I earned that I elected to have automatically deposited pretax. It’s for healthcare expenses.
I had spent about $50 of that. I’ve just been informed that the remainder can only be spent on expenses incurred before I was laid off and that the rest will be forfeited. To my thinking, I should be given a reasonable amount of time to spend it.
With an FSA, if you deposit more than you spend in a year, you forfeit whatever is left. I understand that and was aware of it when I elected to make regular deposits and I planned the amount accordingly. If I had had money left over at the end of the year that would be my fault.
However, taking the remainder because you’re laid off, something you can’t really plan for, is ridiculous and unfair and amounts to theft.
How interesting! I’ve never heard of such a thing, but I’m sort of wondering why would anyone use it if they just take the money, should you not spend it?
Maybe I’m not understanding correctly. But wouldn’t it be infinitely better to just put the same payments into a separate savings account? Of your own, the bank will even do an auto deposit if you like.
At least then, whatever’s left at the end is still there.
What you’re missing is that it’s taken pretax. So what you can do is figure out the minimum that you know you’re likely to spend in a year on healthcare and have it taken out of your pay before it’s taxed. So if you plan properly, you’ll spend it all before the end of the year and won’t lose any and will save the tax dollars.
I think you can instead itemize your expenses and take them as a deduction on April 15, but the FSA makes it more convenient.
I’m sorry about your situation, but appreciate you sharing this information. I have had an FSA for many years, but never realized that I would lose the funds if I was laid off. It pays to read the fine print.
You can itemize, but you only get to deduct the itemized amount if it’s more than, I think, 2% of your income. I may have qualified for that once. The health account works for any amount. For someone with a chronic condition, who knows that she’ll spend X per month on prescriptions, it can work. It’s easy to guess wrong or to lose receipts, but it can work.
The times it’s worked best for me were when I only included prescriptions. In December I’d print out the spreadsheet from the pharmacy website and fax it in so they’d send me a check just before Christmas.
So I guess the best plan would be to try to time prescription refills so as to spend the money as quickly as it’s deposited, or as near to that as possible. That’s hard to do when they’re encouraging you to get 90 days of meds at a time.
As understand it, FSAs make their profit by people not using/not being able to use all the money they put into the damn things. Hence a whole lot of rules that help to maximize that margin. The Mrs. and I have been burned that way before, when rules were changed with little notice. As a result, we keep a sharp watch on what goes into the account, and get it out ASAP.
Short version: My sympathies, but I’m not surprised.
One other advantage to FSAs is that you can spend money in them even before you’ve deposited it. So if you sign up for $1200/yr, and have a slew of unexpected expenses in February, you can get reimbursed that full $1200 even though you’ve only actually deposited $200 so far. Plus, if you leave the job before the end of the year, voluntarily or not, you don’t have to pay back anything. So in my example if you quit in August and have only put in $700 so far, you get to keep that extra $500 you were reimbursed previously.
It used to be you could spend FSA money on non-prescription medications, so if you had some left over at the end of the year, you could restock your painkillers, cold medications, etc. But they changed that several years back, so FSAs only cover prescription meds.
What’s really unfair about this is that, if you’d been employed the entire year, you’d have had a grace period until March 15 of the next year to spend the money in your FSA - even though you can see the end of the year coming; it’s not like the arrival of December 31 is a big surprise. Seems they should have some equivalent period after a layoff, considering you can’t really plan for that.
Check with HR- there used to be a loophole that if you took COBRA coverage, that covered your HSA money as well. Might be more expensive than $200 thoug.
I’ve been told by the benefits company that that’s no the case. They would cover any unclaimed expenses from before 05/01/15 if I take the COBRA but if I choose to get different insurance they apparently won’t even do that (which doesn’t really matter in this case since I have no such expenses).
Company. But people that have spent more than their deposits thus far also don’t have to pay the difference. So the company running your FSA takes some hits, too.