Can't get money paid into Medical FSA if get laid off??

[niccig]

So this is another insurance question.

DH just told me that one of his colleagues who got laid off can't use up the money he's already put in the Health Care FSA. This can't be right? I would think that you should still be able to submit claims and use up that amount...

[michellerw]

I think you can use up what's left as of the date of the layoff/separation, but you typically can't add to the account. The trick is that usually, most of us have already gone negative on our FSAs by a certain point in the year and there's no regulation that you have to be positive in order to spend the money.

I left my last job having spent about $4000 but only having deposited about $3000. I think the theory is that it evens out over the long term by the end of the calendar year.

[TwinFoxes]

I think you can use up what's left as of the date of the layoff/separation, but you typically can't add to the account. The trick is that usually, most of us have already gone negative on our FSAs by a certain point in the year and there's no regulation that you have to be positive in order to spend the money.


This is my understanding too...but you can only file claims on services up to the date of layoff. So say he had $4000 saved up for his December 30th lasik surgery, but got laid off as of Nov. 15th. He couldn't get that surgery on December 30th. But if he had receipts for $4000 worth of contact lens solution that he bought June-October, he can could claim it.

[niccig]

This is my understanding too...but you can only file claims on services up to the date of layoff. So say he had $4000 saved up for his December 30th lasik surgery, but got laid off as of Nov. 15th. He couldn't get that surgery on December 30th. But if he had receipts for $4000 worth of contact lens solution that he bought June-October, he can could claim it.

THis is what DH just explained. I still think it's wrong. You put $4,000 in there, you should still be able to use it in the calendar year, regardless of your layoff date. Then he loses all that money as well as the layoff.

DH is worried about the security of his job, and how much we should put in the FSA or not.

[TwinFoxes]

THis is what DH just explained. I still think it's wrong. You put $4,000 in there, you should still be able to use it in the calendar year, regardless of your layoff date. Then he loses all that money as well as the layoff.

DH is worried about the security of his job, and how much we should put in the FSA or not.

Keep in mind you don't have to wait until the you've put the money in to spend it. So say you're planning on putting $5000 in next calendar year. You can have your own Lasik surgery on January 1st, and get reimbursed for the $5000. A lot of people don't know this.

[katydid1971]

FWIW DH and I had put money into his Medical FSA for DD's surgery that was to be in Aug. DH got laid off in March and because we hadn't planned on being laid off and had planned on using the money to cover DD's surgery we lost over $300. This really chaps my hide because this is OUR money, not money the company puts into the account. WE could have been reimbursed for medical expenses before March but since we didn't have any we are sh!t out of luck. This really pissed me off especially since he was laid off and didn't have other money coming in!!!!! I'm still so mad about this. :32:

[niccig]

Keep in mind you don't have to wait until the you've put the money in to spend it. So say you're planning on putting $5000 in next calendar year. You can have your own Lasik surgery on January 1st, and get reimbursed for the $5000. A lot of people don't know this.

That would work if we could plan expenses for early in the year. I think we want to use our for the deductible, and we won't know how much we will spend until it happens. I will go out though and get my glasses on January 1st.

[stefani]

THis is what DH just explained. I still think it's wrong. You put $4,000 in there, you should still be able to use it in the calendar year, regardless of your layoff date. Then he loses all that money as well as the layoff.

DH is worried about the security of his job, and how much we should put in the FSA or not.


TwinFoxes explanation is correct. If your DH is worried about the security of his job, then make sure you go "negative" on the account, but make sure you can pay back as some employers might make you reimburse them if you have spent more than you have put in.

[niccig]

FWIW DH and I had put money into his Medical FSA for DD's surgery that was to be in Aug. DH got laid off in March and becuase we hadn't planned on being laid off and had planned on using the money to cover DD's surgery we lost over $300. This really chaps my hide because this is OUR money, not money the company puts into the account. WE could have been reimbursed for medical expenses before March but since we didn't have any we are sh!t out of luck. This really pissed me off especially since he was laid off and didn't have other money coming in!!!!! I'm still so mad about this. :32:

I agree. I would be very POed. I think you should either get it paid out and then pay taxes on it, or be able to use it up as long as the service is within the calendar year. With so many people getting laid off, I bet it's becoming more and more of a problem. I think I have to be more on top of submittng my claims and schedule things for early in the year, IF I can do that.

[niccig]

TwinFoxes explanation is correct. If your DH is worried about the security of his job, then make sure you go "negative" on the account, but make sure you can pay back as some employers might make you reimburse them if you have spent more than you have put in.

So, to go negative, I would have to have as many medical expenses early on in the year...mmmm. I know I can do my glasses, but that's really about it. Maybe I should send DH off to chiropactor/PT for his back etc.

[kijip]

I was laid off due to 2/3 workforce reduction in Nov 2006. I still had access to all my FSA funds and they deducted my regular contributions for Nov and Dec from my last check so that I had paid in everything I had access to in the year. It is illegal to not let employees finish out the plan year for something like that if they have paid into it like that. I was able to use the $$ for dental work and medical supplies post my separation date. And you can always spend it down before you pay for it, but when you leave you have to pay in the rest of the year's deductions.

Mine was easier because I had a debit card attached to the account, but my co-workers without the debit card option still could use their $$.

[niccig]

It is illegal to not let employees finish out the plan year for something like that if they have paid into it like that. I was able to use the $$ for dental work and medical supplies post my separation date.

I would think it would be illegal too to prevent access to money already in the FSA. Off to do some legal googling....Katie do you know off hand where that would be written...

[niccig]

So a quick google and this is what I found...I'll have to go back and look for the legal source

You can't get access to the FSA money for services rendered after the date of the lay off, but you can sign up to extend your FSA through COBRA, and then use it up.

Full details here and http://www.kiplinger.com/columns/ask/archive/2009/q0402.htm some quoted below

There may be a way, however, to buy yourself some extra time to use the cash in the account. Some employers give you until the end of the month to use the money, or you might be able to sign up to extend your FSA benefits under COBRA - the same federal law that lets employees keep group health insurance for up to 18 months after they leave their jobs. Most companies with 20 or more employees are required to offer COBRA coverage, which also applies to money in flexible spending accounts. You don't have to use COBRA for health insurance to have COBRA coverage for your flex plan; they're separate from one another.


To keep your FSA open, you would continue making the same monthly contribution plus a 2% charge. So if you signed up to contribute $200 every month while working, you'll contribute $204 per month to keep COBRA coverage for your flexible spending account. For most health-care FSAs, COBRA is offered only if your year-to-date contributions exceed your year-to-date claims when you leave your job, says Dietel. Then you can pay for COBRA for just a month or two while you use the FSA money for health-care costs (the contributions are after-tax when you're no longer an employee; they were made pretax while you were still employed).

[kijip]

I would think it would be illegal too to prevent access to money already in the FSA. Off to do some legal googling....Katie do you know off hand where that would be written...

I don't at all know where that is written up :) . I may be wrong, but that is how it was presented to me when the layoffs were happening. We had the option of paying through the end of the year and having access to the end of the year or ceasing payments in as of last day and only having access through the last day. I chose the former since I had dental work scheduled for December. And as it was I had way too much $$ to spend on drug store stuff. I ran through the store getting nicotine patches for my mom, a digital ear thermometer and other random crap to use it all up!

[niccig]

I did some quick reading and it looks like it depends on your plan and how it's written. Some say you get notified that you have a certain date to use it all by, but the COBRA information is only if you elect to keep it going. I'll look some more after DS is in bed.

[niccig]

Ok, so I looked into this after DS went to bed. I advise everyone who has an FSA to check their Plan Description Summary. I've never seen this document before when we've chosen health plans and FSA. I got a hold of DH's company's Plan online and under the Health Care FSA section it explains what happens if you get terminated from your job. Just love that word "terminated"...makes me think of Dr. Who and the Daleks..terminate...terminate...oh it's late, and I don't know how many BBBers are fans of the BBC's original Dr. Who.

DH's plan says what other PPs mentioned above. Once you are laid off, you can only get reimbursed for medical services before the date of your "termination". But, if you are eligible, you can elect to have the FSA be covered by Cobra, but only if you have a positive balance, and only until the end of that Plan year. Once on Cobra, you will be paying for the FSA monthly amount out of your own money, and it won't be pre-tax. I read one Help Article online that suggested you roll your FSA into Cobra to keep the balance available, pay for only another month or two and use up all the money within that time.

I need to ask DH's work colleague if he knew about this, or if there was some reason he wasn't eligible to do it. I know they went on Cobra, so you would think he could have done that for he FSA. Maybe there was another reason.

Hope that helps someone.

[TwinFoxes]

I was laid off due to 2/3 workforce reduction in Nov 2006. I still had access to all my FSA funds and they deducted my regular contributions for Nov and Dec from my last check so that I had paid in everything I had access to in the year. It is illegal to not let employees finish out the plan year for something like that if they have paid into it like that. I was able to use the $$ for dental work and medical supplies post my separation date. And you can always spend it down before you pay for it, but when you leave you have to pay in the rest of the year's deductions.

Mine was easier because I had a debit card attached to the account, but my co-workers without the debit card option still could use their $$.

Sadly it's not illegal. Your company was just good enough to allow you access. My (former) company does the same.

I'm sure the person in OPs example didn't do Cobra for FSA because it's expensive to make contributions if you're only getting an unemployment check. If you're getting 1000 a month, I doubt you want to/can afford to use $200 for FSA :(

I'm on my iPhone, I'll try to get pertinent links when on my computer.

[vonfirmath]

THis is what DH just explained. I still think it's wrong. You put $4,000 in there, you should still be able to use it in the calendar year, regardless of your layoff date. Then he loses all that money as well as the layoff.

DH is worried about the security of his job, and how much we should put in the FSA or not.

Wrong or not, that's how it works.

When I left my former company, I was not offered COBRA on the FSA portion. just regular. Maybe I should have pursued more.

[kayte]

Keep in mind you don't have to wait until the you've put the money in to spend it. So say you're planning on putting $5000 in next calendar year. You can have your own Lasik surgery on January 1st, and get reimbursed for the $5000. A lot of people don't know this.

This is true. When DH got laid off last February we had already used twice what we had paid in. We were not responsible for repaying the excess.

So I guess the policy of losing what you haven't spent and spending what you haven't paid evens outs?

As others mentioned we were able to continue our FSA through Cobra, though we elected not to take that portion.

[egoldber]

get reimbursed for the $5000.

But you can't get money out of the plan that you haven't put in yet. You can submit the expense, but (at least the way my plan works) the plan will re-pay you as you pay in.

[stillplayswithbarbies]

But you can't get money out of the plan that you haven't put in yet. You can submit the expense, but (at least the way my plan works) the plan will re-pay you as you pay in.

my plan works the other way. You can take it all out (with receipts), even before you have paid it in.
In other words, I could have a medical expense on January 1 for the entire $5000 and I would get the whole amount reimbursed right then.

[dogmom]

Wow, I feel lucky, I left mid year and they said that I could go negative and they wouldn't ask for the difference. I think I work for such a big organization they figure enough people leave some money in the account at the end of the year that they don't spend it all works out in the end.

I still think the savings accounts are great deals, so I don't want this conversation to discourage anyone from starting one. I tell the people I work with just to start with a few hundred dollars if they are are concerned. It's surprising how fast those co-pays and over the counter meds can add up to hundreds of dollars. I have yet to leave money in the account, I usually run it out by September or October.

[daniele_ut]

But you can't get money out of the plan that you haven't put in yet. You can submit the expense, but (at least the way my plan works) the plan will re-pay you as you pay in.

That's only true of FSA dependent care accounts. I submitted enough receipts to max out by May but was still receiving $200 deposits until I left my job last month. I won't pay any more in and they won't pay any more out now.

I have had medical FSA at 5 different employers in the last 15 years and all of them paid out in full as expenses were incurred. When dh got braces we paid in full in April and got a reimbursement back the next week for the full $3500 even though we were only 1/3 of the way through the plan year.

[egoldber]

Interesting. We actually don't have an FSA for this year, but I was reading through the paperwork for next year and I thought that was what it said. But I could easily be confused. :)

[o_mom]

Interesting. We actually don't have an FSA for this year, but I was reading through the paperwork for next year and I thought that was what it said. But I could easily be confused. :)

That might have been for a HSA as well. The HSA works this way where you can't use the money until it is in the account.

[egoldber]

Ah, I think I was looking at HSAs, thank you!

[applebutter]

I'll chime in on a couple points, because I administered FSAs at my former job. :)

The risk goes both ways - the employer takes the risk that the employee will empty their account before all deposits are made, and the employee loses the money if it's not used before the end of their plan year, whenever that might occur.

You can go negative in a health FSA, and the employer CANNOT make you pay it back. They can ask, but cannot enforce their request. Them's the breaks...

The only service that is restricted to be reimbursed in chunks in orthodontia - you can't get it all paid through the FSA at once in most cases (there are exceptions).

If the employer offers COBRA, they HAVE to extend COBRA to the FSA as well. No exceptions. This is a federal regulation. If your employer didn't, they probably didn't know they were supposed to. Too many companies are out of compliance with benefits - it's actually pretty hard to stay IN compliance with all the rules!

I hope that helps :)

[niccig]

If the employer offers COBRA, they HAVE to extend COBRA to the FSA as well. No exceptions. This is a federal regulation. If your employer didn't, they probably didn't know they were supposed to. Too many companies are out of compliance with benefits - it's actually pretty hard to stay IN compliance with all the rules!

I hope that helps :)

Thank you so much. I'll pass this on to DH. He wasn't sure if we should fund the FSA or not for next year.