Mar 10, 2011

Extension of Flexible Spending Account Benefits

Some employers offer a tax benefit called a Flexible Spending Account or Flexible Spending Arrangement (FSA). Basically, money is deducted pre-tax from each paycheck and held in an account by your employer. If you incur a qualifying medical expense, you can then get reimbursed out of that account. You decide how much to deduct from each paycheck, up to $5,000 in a year, and if you fail to use up the money within the year, it reverts to your employer.

After the unexpected hospital stay in 2009, which quickly exhausted the funds in our FSA, we went a little overboard in 2010, figuring that we could use any extra funds to buy new glasses or do some necessary but not urgent dental work. While FSAs traditionally run from January 1 to December 31, some employers provide an extension of benefits into March of the following year. For us, the deadline is March 15.

And so I've found myself scrambling, because for some reason, I'd thought it was March 31. And I've put things off, because I thought we might be getting a somewhat hefty bill related to a procedure that was done last year. But that bill is still being sorted out - it's possible we won't have to pay any of it, and it's unlikely that it will singlehandedly exhaust the remaining funds in our FSA. So I just realized yesterday that we have six - now five - days to use up the FSA money.

Fortunately, our eye doctor was able to fit us in today. I explained the situation and that we need exams and glasses with a date of service of March 15 or earlier. This is definitely stress I could have done without, but I'm grateful that at least something could be worked out so the money won't go to waste. Next year, I'm definitely not waiting til the very last minute!

Note: A friend mentioned that when her husband was laid off from his job, they lost everything in their FSA that they hadn't used yet. So job security is something to keep in mind when creating this type of account!

5 comments:

Lauren said...

Just to note the flip side of the situation you mentioned, if you leave a job and have used more of your FSA money than has been deducted from your checks (which can happen since you can spend all the allotted money without actually having paid it yet), you do not have to repay. So if you know you're leaving a job, you might want to plan some medical expenses before your end date.

Lawanna said...

I always notify my employees, when I receive a resignation notice, that they have a balance in their FSA.

This allows the employee time to make last minute dental, eye and doctor appointments to use up the funds.

Most FSA allows employees to still submit receipts until the end of the plan year, but they can only incurr expenses up until their resignation date.

Chief Family Officer said...

@Lauren - That's good to know, thanks!

@Lawanna - You sound like a great boss :) Thanks so much for the info!

Anonymous said...

Hoping you can help. I have an FSA account and have used more money than has been deducted thus far. I lost my job on April 1, and was advised by my company that I can only use the FSA funds through that time; however, since I am am still covered under their health insurance plan through the end of April, they have again taken out both my health insurance premium AND my FSA money ($115.00 for FSA) on this pay, dated 4/15/11. I still have two additional pays coming from the company (one is a severance check and one is a bonus check due to me). Should they be still taking out FSA money, and if they are still taking it out, can I still use it even though my last day was 4/1/11? Please advise. Thanks.

Chief Family Officer said...

@Anon - I'm sorry, I really don't know. If your plan has a third-party administrator, I would recommend calling them to see what they have to say. Also, you can search the IRS web site (www.irs.gov) for their FSA-related publications.