MSA's/FSA's

[Conan71]

My wife has the opportunity to participate in a Flexible Spending Account at her job.  I read over the materials last night and if I read it correctly, it's a great deal unless you don't use all the money you put in it- i.e. use it or lose it.  

I told her to just look at what she spent this last year on co-pays for normal check-ups, dential, vision, and meds and decide if she thinks it will be the same this year and to not put in any more than that.

Who keeps the un-spent money?  The government or ADP- her payroll processing company?  I really don't see how the un-spent money should become government property, other than allowing a withdrawl at the end of the year with proper taxes deducted.

Does anyone know why they don't allow a "roll-over" to the next plan year?

Can anyone share the good and bad on FSA's?  Neither of us have dependent care expenses, so this would be strictly for medical-related expenses.

[sgrizzle]

The reason it can't rollover is tax laws. HSA's (for high deductible plans) allow rollover. The money contributed that is unspent goes to the employer so underestimate if anything.

Bush has been pushing a law that would allow up to $500 to rollover to the next year but it hasn't passed yet.

If healthcare costs keep going up, I might consider a high-deductible plan and an HSA which does rollover.

[Conan71]

So does the employer have the option to return the un-spent money to the employee with proper taxes deducted?

I can understand the logic behind not allowing an MSA to pile up into a $10K or $20K, because it could become another way to conveniently defer taxes, but I still don't understand the un-used money being confiscated from the person who earned it.

[sgrizzle]

quote:Originally posted by Conan71

So does the employer have the option to return the un-spent money to the employee with proper taxes deducted?

I can understand the logic behind not allowing an MSA to pile up into a $10K or $20K, because it could become another way to conveniently defer taxes, but I still don't understand the un-used money being confiscated from the person who earned it.

Don't think so.

[Conan71]

Okay, finally another question that popped up- (my wife has been too busy today to talk to her HR director) Does the employer completely fund your elected FSA on Jan. 1 and then deduct out your periodic contribution for each pay period?

The reason I ask is they are pulling out an average of your total election amount each pay period, but you know as well as I do that medical costs are anything other than a consistant average from month to month.  IOW, if you had a $200 deductible in January at your Dr. and you were withholding, say $100 per month, then you'd only be able to take out $100 toward the deductible.  Also if you had 75% of your medical expenses the first half of the year and say none the last quarter, seems like you would certainly forfeit some money at the end of the year and have not really gained anything.

[sgrizzle]

quote:Originally posted by Conan71

Okay, finally another question that popped up- (my wife has been too busy today to talk to her HR director) Does the employer completely fund your elected FSA on Jan. 1 and then deduct out your periodic contribution for each pay period?

The reason I ask is they are pulling out an average of your total election amount each pay period, but you know as well as I do that medical costs are anything other than a consistant average from month to month.  IOW, if you had a $200 deductible in January at your Dr. and you were withholding, say $100 per month, then you'd only be able to take out $100 toward the deductible.  Also if you had 75% of your medical expenses the first half of the year and say none the last quarter, seems like you would certainly forfeit some money at the end of the year and have not really gained anything.

Yes. FSA's are fully funded on January 1st. It's kinda like fronting yourself money.

[jne]

I think the $500 dollar roll-over would be a good idea and still would actually benefit the empoyer in covering administrative/management costs.  I would be more likely to throw more money into my flex and then the next year, I might have a surplus and may be more likely to forfit some funds.  Keep in mind that there are a lot of things that can qualify for your flex (band-aids, aspirin, tums, etc.) Read your allowables.  I know walgreens automatically designates what is allowable on all reciepts.  I've found it pretty easy to spend even when I've estimated a little hight. Also, as an employee (at leat where I work)  I can spend a couple grand in January, quit in February and my employer eats all that I have yet to contribute for the year!

[Conan71]

My wife got the details sorted out, and since we shop at Walgreen's all the time, I figured I would check out their web site to see if they had a listing for FSA-qualified OTC remedies and medical devices.  Sure enough, they do.  She elected to try it at $750 for next year and can adjust from there when she figures out what all she spends.  I don't think she will wind up forfeiting anything at the end of the year.