FSAs (flexible spending accounts)

cathyllFebruary 25, 2005

Can someone tell me if we can opt out of an FSA we signed up for 3 weeks ago? DH's employer says it's not allowed for another year and I want to be 100% sure. Thanks.

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good36

I don't believe you can "get out" after you signed up. At least where my husband works you can't. Just wondering why would you like out? It's a great program.
Judy

    Bookmark   February 25, 2005 at 5:34PM
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nancyinmich

Yeah, once you are in, you are in. We put a LOT into ours every year and end up running out of funds in the fall. I guess that does not speak well for our health! I always can use an extra pair of glasses ($300 minimum with my prescription) or some extra Jobst stockings ($70+ a pair), so we have things to spend it on if we do get a healthier year. One good thing is that you probably don't have to wait until the account has $500 to send in $500 worth of bills to get your money back. Since you are committed to paying it, you can get the money refunded as soon as you spend it - at least we can with DH's employer.

    Bookmark   February 26, 2005 at 12:04AM
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kittiemom

You'll need to read the paperwork from your DH's employer. At most places, you when you sign up for insurance, FSA, or a retirement plan, you have to stay in for a year - until the next enrollment period.

I'm also curious as to why you want to get out. I wish either DH or I had one through our employer. It can save a lot of money.

    Bookmark   February 26, 2005 at 8:32AM
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cathyll

I did some crunching (after the fact, unfortunately) and it looks like all we'd save is about $237 a year. Another reason for wanting out is that it's only for 2k and we spend approximately $6300 a year in medical expenses;after we've spent the FSA money, there's still $75.00 deducted per pay period for the FSA and at a time when we're back to paying out of pocket. Am I making sense?

    Bookmark   February 26, 2005 at 8:43AM
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steve_o

I'm not sure _I_ understand. You're saying that you routinely run up medical expenses of $6300/yr but you only set aside $2000 in the FSA? If you did, you underestimated; your tax savings would have been much higher if you had set aside the entire $6000 (or however much they'd let you put in).

You are "filling" the FSA with every paycheck, so that you reach your $2000 by the end of the year. The people providing the FSA don't have any say in how quickly you spend the money (except that they likely will not reimburse you for money you haven't yet put into the account).

You can check with your plan administrators, but you probably won't be able to get out of it for this year. I think this will turn out to be a relatively inexpensive lesson in how to use FSAs; maybe next year you can up the amount. FSAs are still a good idea for most people.

    Bookmark   February 26, 2005 at 9:34AM
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cathyll

I sure HOPE this turns out to be an inexpensive lesson, Steve. We spend approx. $6300 out-of-pocket every year.
This FSA is front-loaded and the employer will only allow 2K yearly. Thanks for your help, all.

    Bookmark   February 26, 2005 at 4:29PM
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good36

If you spend $6300.00 each year and only set aside 2k, what are you worrying about? I'm confused. You will get all of your $2000 back as soon as you spend it. Lesson is a good one, you are only paying tax's on $4300.00! The $2000 is tax free.
Judy

    Bookmark   February 26, 2005 at 5:53PM
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nancyinmich

I think what Cathy is saying is that long after she gets the $2000 back (which is all the employer allows them to put in), the $75 is still being taken out of the paycheck. So they are paying both the high medical bills and the $75. It is a cash-flow problem. They may save $237 over the course if the full year, but since the $75 is taken out at the same time that they are paying fully for later bills, it is difficult to make the payments. When the budget it tight,it is difficult to plan ahead and save for the future. Some emergency always comes up and the money put aside gets spent. Cathy, do you have to wait until you have put $2000 in to get it back out? With our plan we can get it out as soon as we spend it.

    Bookmark   February 27, 2005 at 12:53AM
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good36

Nancy,
I understand what you are saying but, after handing in reciets you receive your money back. If you keep this money for the next bill no money will come out of your budget until the $2000 is used up. Plus the $75.00 taken out of the check is tax free, so you really only notice maybe $55 difference.
Cathy,
Hope it's better this year, we have been in your shoes and totally undersand. We had 2 preemies and lots of medical bills when the kids were young. Hospitalizations and doctors visits were common. We did not have the option of FSA at that time.
Judy

    Bookmark   February 27, 2005 at 7:58PM
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steve_o

I sure HOPE this turns out to be an inexpensive lesson, Steve.

Gotcha. Interesting; I've never heard of an employer that capped the contribution to an FSA at that level. But it's their plan, I guess. My apologies if I made it seem like the shortage was your fault; I didn't understand that your plan limited how much you could contribute.

    Bookmark   February 28, 2005 at 9:39AM
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roseyp8255

Does your plan not have a Flex Card? Or are those still relatively new? we have them at our outfit - use it just like a M/C or Visa - it automatically deducts the funds from our flex account, rather than having to file for reimbursement - AND, it is like an "interest-free" loan - we use it whenever we need it - as long as we don't go over the total amount put in each year.

    Bookmark   March 1, 2005 at 9:18PM
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Vickey__MN

Our FAFSA (Or Cafeteria Plan or 512(B) Plan) we have a $3K limit, each plan is different. You still get savings on what you have because it's non tax. If you'd like I can sent you a worksheet that we give to employees to help explain this.

Vickey-MN

    Bookmark   March 8, 2005 at 5:41PM
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kksmama

If you have a "qualifying event" you can make changes during the year, some plans are more strict about that than others but I think they're supposed to all be goverened according to the same (federal) law. Qualifying events include job changes (for you or your spouse), birth or adoption of child, and other major life events.

    Bookmark   March 13, 2005 at 8:12PM
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cseyer

cathll I can sorta see your thoughts on why this is a bad thing but try to look at it another way. It sounds like your plan will allow (like mine) for you to spend the $2k anytime, even before you have actually put it into the FSA. So basically you are getting a tax free, interest free loan. While you are spending this temporarily free money you should be saving your actual earned dollars for later in the year. Later in the year you can pay your self back with these savings. FSA are a wonderful tax break and it sounds like with your high medical bills you need every advantage you can get!

Another small advantage you may get (I do) is every year there is money surrendered in FS accounts that isnt used/claimed by plan participants. My plan divides this money up the following year to all the participants from the previous year(Yeah real free money!!)

    Bookmark   March 15, 2005 at 5:29PM
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