Flexible Spending Accounts and leaving your employer

Discussion in 'Tax' started by SFCanadian, Jun 14, 2005.

  1. SFCanadian

    SFCanadian Guest

    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    approximately $100 / month into my FSA and have withdrawn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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    SFCanadian, Jun 14, 2005
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  2. 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 approximately $100 / month into my FSA and have withdrawn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 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, Jun 15, 2005
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  3. 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)


    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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    Victor Roberts, Jun 15, 2005
    #3
  4. 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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    Sassy Baskets, EA, Jun 15, 2005
    #4
  5. "SFCanadian" <> 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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    Jonathan Kamens, Jun 15, 2005
    #5
  6. SFCanadian

    Bob Sandler Guest

    > 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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    Bob Sandler, Jun 15, 2005
    #6
  7. SFCanadian

    JoeTaxpayer Guest

    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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    JoeTaxpayer, Jun 15, 2005
    #7
  8. SFCanadian

    Guest

    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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    , Jun 15, 2005
    #8
  9. SFCanadian

    Dick Weaver Guest

    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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    Dick Weaver, Jun 15, 2005
    #9
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