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Flexible Spending Accounts and leaving your employer

 
 
SFCanadian
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      06-14-2005, 04:24 AM
I am curious if someone can explain to me what happens to my
Flexible Spending Account if I leave my employer? I put
approximately $100 / month into my FSA and have withdrawn
almost the full $1200 for the year that I would have
available already. But there is a slight chance that I will
switch employers shortly. Given that I haven't contributed
for the $1200, will my employer:
- tax my last paycheck for it?
- send me a bill requiring an after-tax payment for the
balance?
- suck up the moneys that I incurred that I have not yet
paid for? (ok, I doubt it... but I had to ask)

Thanks for your help,
Jamie

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Victor Roberts
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      06-15-2005, 10:04 AM
SFCanadian" <(E-Mail Removed)> wrote:

> I am curious if someone can explain to me what happens to my
> Flexible Spending Account if I leave my employer? I put
> approximately $100 / month into my FSA and have withdrawn
> almost the full $1200 for the year that I would have
> available already. But there is a slight chance that I will
> switch employers shortly. Given that I haven't contributed
> for the $1200, will my employer:
> - tax my last paycheck for it?
> - send me a bill requiring an after-tax payment for the
> balance?
> - suck up the moneys that I incurred that I have not yet
> paid for? (ok, I doubt it... but I had to ask)


None of the above. You are entitled to the full amount you
have specified to be set aside for the year (assuming it was
used for covered medial expenses) even if you have not
contributed the full amount. Your employer makes up the
difference. From the employer's side this is balanced by the
funds that employer gets to keep when employees do not spend
the full amount they have set aside.

This is discussed on Page 13 of IRS Publication 969:

"You must be able to receive the maximum amount of
reimbursement (the amount you have elected to contribute for
the year) at any time during the coverage period, regardless
of the amount you have actually contributed."

--
Vic Roberts
Replace xxx with vdr in e-mail address.

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Victor Roberts
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      06-15-2005, 10:04 AM
SFCanadian" <(E-Mail Removed)> wrote:

> I am curious if someone can explain to me what happens to my
> Flexible Spending Account if I leave my employer? I put
> approximately $100 / month into my FSA and have withdrawn
> almost the full $1200 for the year that I would have
> available already. But there is a slight chance that I will
> switch employers shortly. Given that I haven't contributed
> for the $1200, will my employer:
> - tax my last paycheck for it?
> - send me a bill requiring an after-tax payment for the
> balance?
> - suck up the moneys that I incurred that I have not yet
> paid for? (ok, I doubt it... but I had to ask)


There is more in that paragraph in Pub 969 that I should
have included:

"The maximum amount you can receive tax free is the total
amount you elected to contribute to the health FSA for the
year."

Note the word "elected" instead of "contributed."

--
Vic Roberts
Replace xxx with vdr in e-mail address.

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Sassy Baskets, EA
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      06-15-2005, 10:23 AM
SFCanadian wrote:

> I am curious if someone can explain to me what happens to my
> Flexible Spending Account if I leave my employer? I put
> approximately $100 / month into my FSA and have withdrawn
> almost the full $1200 for the year that I would have
> available already. But there is a slight chance that I will
> switch employers shortly. Given that I haven't contributed
> for the $1200, will my employer:
> - tax my last paycheck for it?
> - send me a bill requiring an after-tax payment for the
> balance?
> - suck up the moneys that I incurred that I have not yet
> paid for? (ok, I doubt it... but I had to ask)


None of the above: you get to keep the money. Make sure you
get the rest of the $1200 before you leave.

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Jonathan Kamens
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      06-15-2005, 10:23 AM
"SFCanadian" <(E-Mail Removed)> writes:

> Given that I haven't contributed
> for the $1200, will my employer:
> - tax my last paycheck for it?


No.

> - send me a bill requiring an after-tax payment for the
> balance?


No.

> - suck up the moneys that I incurred that I have not yet
> paid for? (ok, I doubt it... but I had to ask)


Yes.

This is how Flexible Spending Accounts work, by law. If you
spend more than has been withheld and then leave the company
in the middle of the plan year, the plan has to eat your
overspending. On the flip side, if you leave the company
and you've spent *less* than has been withheld, you lose
whatever you haven't spent.

I believe this question has been answered before in this
newsgroup. You might consider searching the archives of the
group before posting a question.

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Bob Sandler
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      06-15-2005, 10:23 AM
> I am curious if someone can explain to me what happens to my
> Flexible Spending Account if I leave my employer? I put
> approximately $100 / month into my FSA and have withdrawn
> almost the full $1200 for the year that I would have
> available already. But there is a slight chance that I will
> switch employers shortly. Given that I haven't contributed
> for the $1200, will my employer:
> - tax my last paycheck for it?
> - send me a bill requiring an after-tax payment for the
> balance?
> - suck up the moneys that I incurred that I have not yet
> paid for? (ok, I doubt it... but I had to ask)


The employer takes the loss. You come out ahead. So try to
use up the rest of the $1200 before you leave. (Is this what
you meant by "suck up the moneys"?)

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JoeTaxpayer
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      06-15-2005, 10:42 AM
SFCanadian wrote:

> I am curious if someone can explain to me what happens to my
> Flexible Spending Account if I leave my employer? I put
> approximately $100 / month into my FSA and have withdrawn
> almost the full $1200 for the year that I would have
> available already. But there is a slight chance that I will
> switch employers shortly. Given that I haven't contributed
> for the $1200, will my employer:
> - tax my last paycheck for it?
> - send me a bill requiring an after-tax payment for the
> balance?
> - suck up the moneys that I incurred that I have not yet
> paid for? (ok, I doubt it... but I had to ask)


The answer is 'C'. Why do you doubt that?

Any money put into an FSA and not used is given up, you have
the opposite side of this. I'd think more people are on the
losing end, so you just made up for a few of them.

Joetaxpayer (at Earthlink dot net)

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ejmoore2@comcast.net
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      06-15-2005, 10:42 AM
SFCanadian wrote:

> I am curious if someone can explain to me what happens to my
> Flexible Spending Account if I leave my employer? I put
> approximately $100 / month into my FSA and have withdrawn
> almost the full $1200 for the year that I would have
> available already. But there is a slight chance that I will
> switch employers shortly. Given that I haven't contributed
> for the $1200, will my employer:
> - tax my last paycheck for it?
> - send me a bill requiring an after-tax payment for the
> balance?
> - suck up the moneys that I incurred that I have not yet
> paid for? (ok, I doubt it... but I had to ask)


You will owe nothing to your employer. It's sort of the
flip side of "use it or lose it". I also speak from
personal experience.

Erin Moore, CPA

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Dick Weaver
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      06-15-2005, 11:01 AM
SFCanadian wrote:

> I am curious if someone can explain to me what happens to my
> Flexible Spending Account if I leave my employer? [snip]...
> will my employer:
> - tax my last paycheck for it?
> - send me a bill requiring an after-tax payment for the
> balance?
> - suck up the moneys that I incurred that I have not yet
> paid for? (ok, I doubt it... but I had to ask)


Only your employer knows what your employer will do.

As to what your employer should do -- the employer (the
plan) takes the loss, you come out a winner. It's the
opposite scenario of end of year where you have not consumed
the full contribution and the plan keeps the remainder.

Anything else and you will need to educate your employer as
to the plan specifications.

dick w

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