does it make sense to pass on the flex acct at work?

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does it make sense to pass on the flex acct at work?

Postby caroljm36 » Sun Dec 30, 2012 3:27 pm

Every year I wrack my brain over how much to hold out for our health flex plan. It drives me crazy..I worry that I held out too much but then go through it quickly in some years. Other years I fret about not using it all and losing the balance, and scrounge around for some way to use it. But I wonder sometimes if I would just consume less, too, if I didn't have to worry about using it up.

It's really just about borrowing money from future paychecks, and getting the tax deduction. If I increase the 401k contribution, wouldn't I be doing the same thing? A lesser concern is that it reduces my Social Security income on box 2 of the W-2 and so might have a lowering effect on my future retirement (I do realize they base it on 35 years now, but I got a late start and have some bad or no-income years). I understand 401k does not reduce Social Security income number, only the various health plans do.

When my emergency funds got low it was good to have the flex money...but I've built them back up again. Doesn't it make sense to just bite the bullet, pay out of pocket and take the tax deduction via 401k instead?
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Re: does it make sense to pass on the flex acct at work?

Postby nisiprius » Sun Dec 30, 2012 3:44 pm

No comment on your situation. During the time I used a flex account, it seemed to make perfect sense because we were getting regular monthly bills for my daughter's orthodonture. I found it to be a royal PITA, because there was paperwork and an irritating delay between receiving the bill and getting the payment. And, sure enough, I got laid off in the middle of the year and lost a chunk of money. That permanently soured me on flex accounts. Maybe it's all different now.
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Re: does it make sense to pass on the flex acct at work?

Postby livesoft » Sun Dec 30, 2012 3:45 pm

I would max out 401(k) before considering FSA. OTOH, if you know you are going to spend that money anyways, you should do both. Think of this way: Even if you don't spend it all, the leftovers could be less than the amount of taxes taken out, so you come out ahead anyways.
It's all about short-term opportunistic rebalancing due to a short-term change in one's asset allocation, uh, I mean opportunistic rebalancing, uh I mean rebalancing, uh I mean market timing.
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Re: does it make sense to pass on the flex acct at work?

Postby zzcooper123 » Sun Dec 30, 2012 3:53 pm

I forgot...can you have an FSA and HSA at the same time?
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Re: does it make sense to pass on the flex acct at work?

Postby MathWizard » Sun Dec 30, 2012 4:17 pm

Definitely use FSA if you are pretty sure to have any medical expenses. E.g.
annual eye exams,
annual dental checkup if you don't have a dental plan, and
maintenance drugs like cholestrol reducers or insulin.
Current law does not allow claiming OTC drugs, just prescribed medicine.

Pharmacies will print you up a list of prescriptions for the current year, you can submit
at the end of the year if submitting each time is a pain.
You can also use this for planning for the next year.

My wife and I both wear glasses, so if we have too much left, we order a new pair near
the end of the year.

You can always put in a miminal amount, say $240/year. You are almost sure to spend that
much with copays and deductibles plus the occassional anti-biotic. The savings in federal
and state income taxes is significant. I'm not sure about whether FICA is paid on that money
or not.
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Re: does it make sense to pass on the flex acct at work?

Postby Calm Man » Sun Dec 30, 2012 4:21 pm

I used an FSA for one year and then concluded that I would never do it again and never have. The submissions, statements, deposits into my checking account whenever they occurred and reconciliation were simply not worth it for me. Others might not care about the nuisance of it and the time needed but I did.
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Re: does it make sense to pass on the flex acct at work?

Postby livesoft » Sun Dec 30, 2012 4:26 pm

When we had an FSA, I submitted once a year. I simply printed up the EOBs off my health insurance web site and totaled up the "you paid" amounts. Check came within a week. They do know that folks think the FSA is a PITA, so they try to make it easy with debit cards, too. I got my spouse to always use the debit card that came with the account at the pharmacy and nowhere else.

So between the EOBs and the FSA debit card, it was really a piece of cake. Without those 2 methods, I think it would be pretty difficult.
It's all about short-term opportunistic rebalancing due to a short-term change in one's asset allocation, uh, I mean opportunistic rebalancing, uh I mean rebalancing, uh I mean market timing.
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Re: does it make sense to pass on the flex acct at work?

Postby peppers » Sun Dec 30, 2012 4:55 pm

Our FSA is set up so that any medical co-pays or deductibles we may have are direct deposited into the checking account after they review the EOB. No effort on our part. Vision and dental, we submit the paperwork and then after review, direct deposit. I also have a HRA that is linked to the FSA. HRA is funded by the company.
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Re: does it make sense to pass on the flex acct at work?

Postby 555 » Sun Dec 30, 2012 5:27 pm

I don't see how contributing to FSA or 401k could be considered alternatives.

I pay with my credit card, not the FSA debit card, since the credit card gives 2% back and you have to submit receipts either way.

Our FSA has a $60 annual fee so it's not worthwhile for small balances.
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Re: does it make sense to pass on the flex acct at work?

Postby peppers » Sun Dec 30, 2012 5:34 pm

Pay for an FSA? I did not know that.
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Re: does it make sense to pass on the flex acct at work?

Postby caroljm36 » Sun Dec 30, 2012 6:50 pm

555 wrote:I don't see how contributing to FSA or 401k could be considered alternatives.



They both reduce taxable income. The way I am looking at it, it's still money I have to pay out of pocket, only with flex it is pre-tax, and you can spend ahead. But it's still my own money, not some insurance payout. So if I have cash set aside for copays and glasses, and put more in 401k, what's the diff?

I am used to the routine for getting reimbursements, so that's not the problem. I just have trouble guessing the amounts right and of course really like reducing my take-home pay. HSA is not available and flex is use-or-lose it.
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Re: does it make sense to pass on the flex acct at work?

Postby happymob » Sun Dec 30, 2012 7:01 pm

nisiprius wrote:No comment on your situation. During the time I used a flex account, it seemed to make perfect sense because we were getting regular monthly bills for my daughter's orthodonture. I found it to be a royal PITA, because there was paperwork and an irritating delay between receiving the bill and getting the payment. And, sure enough, I got laid off in the middle of the year and lost a chunk of money. That permanently soured me on flex accounts. Maybe it's all different now.

Not really all that different. Big pain in the caboose, so not worth it to us, absent large expected expenses.

We would do a dependent day care FSA if we had that option, but we pass on the health care FSA available to us due to bad experiences in the past.
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Re: does it make sense to pass on the flex acct at work?

Postby Mitchell777 » Sun Dec 30, 2012 7:03 pm

I always struggle with how much to put into my FSA. This was the first year that I got to the end of the year and had almost a couple hundred dollars unused. Employer said there would be no expension past Dec 31 for us, so I bought a pair of glasses I really did not yet need. The government has really clamped down on the OTC meds/products that can be used without a doctors' authorization so it is no longer easy to but some OTC meds at the end of the year. I max out on retirement contributions so this is extra pre tax money, but it's always a guess as to how much to contribute at least for me
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Re: does it make sense to pass on the flex acct at work?

Postby JimEli » Sun Dec 30, 2012 7:17 pm

FWIW, consider during a year in which employment is terminated (retirement, etc), the full amount of the FSA is available starting on January 1, regardless of contributions. I’m not aware of a mechanism to recover the spent FSA.
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Re: does it make sense to pass on the flex acct at work?

Postby HueyLD » Sun Dec 30, 2012 7:28 pm

caroljm36 wrote:The way I am looking at it, it's still money I have to pay out of pocket, only with flex it is pre-tax, and you can spend ahead. But it's still my own money, not some insurance payout. So if I have cash set aside for copays and glasses, and put more in 401k, what's the diff?

I am used to the routine for getting reimbursements, so that's not the problem. I just have trouble guessing the amounts right and of course really like reducing my take-home pay. HSA is not available and flex is use-or-lose it.

Since you are fine with work associated with reimbursements, it should be a relatively easy task as long as you don't try to fine tune it to the max. Due to the use or lose feature, you have to be conservative with your estimates and only set aside an amount for "known" copays and deductibles. Don't be greedy.

It's good for those who don't have enough medical expenses to itemize. It's also good for those who don't itemize.
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Re: does it make sense to pass on the flex acct at work?

Postby Bob's not my name » Sun Dec 30, 2012 7:40 pm

See this recent thread on how much an FSA actually saves you in taxes and on why you shouldn't be sweating the use-it-or-lose-it rule: viewtopic.php?f=10&t=101267
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Re: does it make sense to pass on the flex acct at work?

Postby 555 » Sun Dec 30, 2012 8:13 pm

caroljm36 wrote:
555 wrote:I don't see how contributing to FSA or 401k could be considered alternatives.


"They both reduce taxable income. The way I am looking at it, it's still money I have to pay out of pocket, only with flex it is pre-tax, and you can spend ahead. But it's still my own money, not some insurance payout. So if I have cash set aside for copays and glasses, and put more in 401k, what's the diff?

I am used to the routine for getting reimbursements, so that's not the problem. I just have trouble guessing the amounts right and of course really like reducing my take-home pay. HSA is not available and flex is use-or-lose it."


So are you considering putting money into a 401k instead of going to the dentist? See my point?
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Re: does it make sense to pass on the flex acct at work?

Postby Bob's not my name » Sun Dec 30, 2012 8:36 pm

caroljm36 wrote:It's really just about borrowing money from future paychecks
This is incorrect. You don't borrow from future paychecks.
caroljm36 wrote:and getting the tax deduction
This is not really accurate. An FSA contribution is not a tax deduction. It is a means of exempting a portion of your income from your W2 wages, so it avoids income tax, SS tax, Medicare tax, ACA 0.9% and 3.8% taxes, and AGI-based phaseouts. A tax deduction is typically a "below the line" reduction in taxable income, which avoids none of these except nominal income tax. Since AGI-based taxes are becoming increasingly common (and in many cases dominate nominal tax brackets in determining your marginal rate), an FSA contribution is more powerful than a tax deduction. There are some "above the line" deductions like the student loan interest deduction, but these don't avoid SS tax, Medicare tax, or ACA 0.9% tax.
caroljm36 wrote:If I increase the 401k contribution, wouldn't I be doing the same thing?
Not even remotely the same thing. I don't understand the comment.
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Re: does it make sense to pass on the flex acct at work?

Postby caroljm36 » Sun Dec 30, 2012 9:34 pm

Bob's not my name wrote:
caroljm36 wrote:It's really just about borrowing money from future paychecks
This is incorrect. You don't borrow from future paychecks.
caroljm36 wrote:and getting the tax deduction
This is not really accurate. An FSA contribution is not a tax deduction. It is a means of exempting a portion of your income from your W2 wages, so it avoids income tax, SS tax, Medicare tax, ACA 0.9% and 3.8% taxes, and AGI-based phaseouts. A tax deduction is typically a "below the line" reduction in taxable income, which avoids none of these except nominal income tax. Since AGI-based taxes are becoming increasingly common (and in many cases dominate nominal tax brackets in determining your marginal rate), an FSA contribution is more powerful than a tax deduction. There are some "above the line" deductions like the student loan interest deduction, but these don't avoid SS tax, Medicare tax, or ACA 0.9% tax.
caroljm36 wrote:If I increase the 401k contribution, wouldn't I be doing the same thing?
Not even remotely the same thing. I don't understand the comment.


Okay, I misspoke, but they're both above the line reductions in taxable income. I still don't understand, if I reduce my taxable through 401k or FSA, what difference does it make, since I am still paying out of pocket for copays, glasses and such. But I suspect I may not spend so much, if I know I can't immediately be reimbursed from my future income.
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Re: does it make sense to pass on the flex acct at work?

Postby jda » Sun Dec 30, 2012 9:44 pm

You save payroll tax (social security 4.2% this year, 6.2% next year + medicare 1.45%) when using FSA where 401K you have to pay the payroll tax.

If you know you are going to spend the money on medical expenses then it's definitely worth it. I guess one I way I view it is that my break even point is about 60% of my FSA contribution, so everything above that is gravy.

Disclaimer: I max out my 401k regardless of my FSA contribution.
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Re: does it make sense to pass on the flex acct at work?

Postby canga » Sun Dec 30, 2012 10:06 pm

I treat the FSA as a line item in my yearly budget. Add up all expected copays and medications. If you are having an expected upcoming procedure, throw that in as well (braces, lasik, newborn, etc). Go to http://www.drugstore.com and check the FSA eligible items to see if you need anything. I used the debit card for convenience and placed the receipts in their own file. I never contributed more than a few hundred bucks, but I have yet to have a planned, expensive procedure. There is probably a minimum amount you spend on health care each year that you can budget into the FSA.
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Re: does it make sense to pass on the flex acct at work?

Postby peppers » Sun Dec 30, 2012 11:00 pm

______________________With FSA________________Without FSA

Annual Base Salary_______30000___________________30000

Health Care FSA Contrb....-2500
Dependent Care Contrb....-2000
Taxable Salary..............25000.........................30000
Fed Income tax (est)......-3825..........................-4500
Soc Sec (FICA) 7.65%......-1951..........................-2295
After tax expense..............0..........................-4500
Take-home salary..........19724.........................18705
Tax savings..................1019

Based on 15 percent tax rate
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Re: does it make sense to pass on the flex acct at work?

Postby vveat » Sun Dec 30, 2012 11:22 pm

I would advise caution even when you think you have expenses that are certain to happen. Nothing is certain, and psychologically it's worse to have money left over (lost) than to lose some tax advantage.
We had a situation 2 years ago when we had an IVF procedure planned and decided to go all in and put in FSA the whole $20k it would have cost. As certainty goes, ours was pretty high, because the procedure was scheduled and prepaid already, and as we had exceeded the lifetime maximum I knew insurance wouldn't cover it. Well, first we postponed because of a medical emergency and then just as I started the medications we found out I am pregnant (and no, it wasn't something anybody could have expected, not with our history). Well, now imagine trying to spend anything close to $20k, when (1) we have pretty good insurance with high coverage and no co-pays; (2) being pregnant, any optional procedures I could have thought of were pretty much off limits. At least this was the year before they took OTC off the table, and we purchased in bulk from the local pharmacy. The other good side was that our insurance company allows 3 months of the new year to be charged against the old balance (do check if that applies in your case as well), so that gave us some extra time. All in all, we lost over $700, but compared to the $20k at risk we felt lucky. Since then we've gone with the minimum:-)
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Re: does it make sense to pass on the flex acct at work?

Postby tfb » Mon Dec 31, 2012 1:41 am

Mitchell777 wrote:I always struggle with how much to put into my FSA. This was the first year that I got to the end of the year and had almost a couple hundred dollars unused.

Even if you lose that a couple hundred dollars, you are better off than being too conservative and paying hundreds of dollars with after-tax money.
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Re: does it make sense to pass on the flex acct at work?

Postby JustBill » Mon Dec 31, 2012 2:02 am

Going forward we're only discussing the tax benefit on an annual maximum of $2,500 set-aside into the FSA. Yet still there's no reason not to pay for predictable and necessary medical expenses without the whack of taxation.
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Re: does it make sense to pass on the flex acct at work?

Postby jsl11 » Mon Dec 31, 2012 3:07 am

caroljm36 wrote:Okay, I misspoke, but they're both above the line reductions in taxable income. I still don't understand, if I reduce my taxable through 401k or FSA, what difference does it make, since I am still paying out of pocket for copays, glasses and such. But I suspect I may not spend so much, if I know I can't immediately be reimbursed from my future income.
The money that is put into a 401k is tax deferred. Eventually, you will have to pay the tax on it. The money in a FSA is tax free. There is never any tax on this money.
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Re: does it make sense to pass on the flex acct at work?

Postby interplanetjanet » Mon Dec 31, 2012 4:08 am

I have maxed out my medical FSA for years - this was $5k with my employer through this year (2012) and will be $2500 per year going forward. My family medical expenses are predictable and high and my marginal rate is high, so it's an easy decision.

I spread out the pain of getting and doing paperwork by doing my FSA reimbursements every week. If I don't have any EOBs, I don't do anything; if I do, I print off a cover sheet and fax them in (they're stuck firmly in the 20th century). Mail order prescriptions "auto approve" if I use my FSA administrator's debit card, so that's what I do. Done this way, it takes me a few minutes every weekend instead of hours at the end of the year, I find this more palatable. I used to do them at the end of the year and it became a Herculean effort at times.

I agree that it makes sense to overestimate your expenses slightly. Even if you "leave some money on the table" you will come out ahead if you come fairly close.
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Re: does it make sense to pass on the flex acct at work?

Postby Bob's not my name » Mon Dec 31, 2012 5:01 am

vveat wrote:I would advise caution even when you think you have expenses that are certain to happen. Nothing is certain, and psychologically it's worse to have money left over (lost) than to lose some tax advantage.
We had a situation 2 years ago when we had an IVF procedure planned and decided to go all in and put in FSA the whole $20k it would have cost. As certainty goes, ours was pretty high, because the procedure was scheduled and prepaid already, and as we had exceeded the lifetime maximum I knew insurance wouldn't cover it. Well, first we postponed because of a medical emergency and then just as I started the medications we found out I am pregnant (and no, it wasn't something anybody could have expected, not with our history). Well, now imagine trying to spend anything close to $20k, when (1) we have pretty good insurance with high coverage and no co-pays; (2) being pregnant, any optional procedures I could have thought of were pretty much off limits. At least this was the year before they took OTC off the table, and we purchased in bulk from the local pharmacy. The other good side was that our insurance company allows 3 months of the new year to be charged against the old balance (do check if that applies in your case as well), so that gave us some extra time. All in all, we lost over $700, but compared to the $20k at risk we felt lucky. Since then we've gone with the minimum:-)
I believe it was unusual to have had access to FSAs with limits this high. $5,000 was typical. In any case, the ACA has imposed a $2,500 limit (so possibly $5,000 for a working couple with access to two health FSAs) and the use-it-or-lose-it rule may be suspended or relaxed, per the linked thread. As also discussed in the linked thread, even if the use-it-or-lose-it rule is retained, it is not necessary to spend all the money to come out ahead, so it is best NOT to be conservative with FSA contributions. If you mean you put $20,000 in an FSA and had $19,300 of medical expenses, the FSA probably saved you $10,000 of net income. That's a huge savings.

Furthermore, it's your employer, not your insurance company, that sets the FSA term and allows the 2.5-month overlap (it's not 3 months). Finally, this is an investing forum. We invest in the stock market even though we know there's a chance we'll lose money on that investment. If you have a high probability of a $20,000 medical expense and an FSA will allow you to cover that with only $10,000 of net income, AND you have alternatives to mitigate your loss in the felicitous event that the high probability medical expense is not necessary, it's a good investment. Always remember that an investment the down side of which occurs only when there is countervailing good fortune is a good investment. Pre-tax tax-advantaged savings fall in this category.
Last edited by Bob's not my name on Mon Dec 31, 2012 8:55 am, edited 2 times in total.
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Re: does it make sense to pass on the flex acct at work?

Postby CykoNut » Mon Dec 31, 2012 6:33 am

I know 3 people who've used FSA, and they used it for a predetermined operation/ treatment. Two needed LASIK eye surgery, 1 needed braces, and they each just got an estimate before filling out the FSA, so they knew exactly how much they needed. Doesn't sound like it'll work in your situation since you cant predict what medical bills you'll have. Probably using previous years expenses to estimate cost would work best for you.

jsl11 wrote:
caroljm36 wrote:Okay, I misspoke, but they're both above the line reductions in taxable income. I still don't understand, if I reduce my taxable through 401k or FSA, what difference does it make, since I am still paying out of pocket for copays, glasses and such. But I suspect I may not spend so much, if I know I can't immediately be reimbursed from my future income.
The money that is put into a 401k is tax deferred. Eventually, you will have to pay the tax on it. The money in a FSA is tax free. There is never any tax on this money.
Jeff


Also, if you put that amount into your 401k, you're still going to have to come up with money to pay the medical bills. E.g. To pay for a $3000 medical bill, you would have to put $3000 into your 401k and another $3000 from your paycheck to pay the bill.
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Re: does it make sense to pass on the flex acct at work?

Postby scubacat » Mon Dec 31, 2012 7:23 am

My FSA account is linked to my health insurance plan so whenever I pay for something, they automatically reimburse me for it. Every year, I estimate what my expenses are going to be. I then set my limit a little under. Since I don't have to worry about the paperwork, it is totally worth it. If I had to fill out the paperwork myself, I most likely would do it even if my expenses are relatively low. I don't feel like I spend extra because I have it. If you feel that having the account is encouraging you to spend money on things you normally wouldn't, I would consider lowering your contribution so you have to spend it on healthcare necessities.
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Re: does it make sense to pass on the flex acct at work?

Postby Bob's not my name » Mon Dec 31, 2012 7:30 am

Bob's not my name wrote:As also discussed in the linked thread, even if the use-it-or-lose-it rule is retained, it is not necessary to spend all the money to come out ahead, so it is best NOT to be conservative with FSA contributions.
scubacat wrote:Every year, I estimate what my expenses are going to be. I then set my limit a little under.
You shouldn't. Your best guess is the winningest bet. See the math in this thread: viewtopic.php?f=10&t=101267
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Re: does it make sense to pass on the flex acct at work?

Postby caroljm36 » Mon Dec 31, 2012 10:12 am

jsl11 wrote:
caroljm36 wrote:Okay, I misspoke, but they're both above the line reductions in taxable income. I still don't understand, if I reduce my taxable through 401k or FSA, what difference does it make, since I am still paying out of pocket for copays, glasses and such. But I suspect I may not spend so much, if I know I can't immediately be reimbursed from my future income.
The money that is put into a 401k is tax deferred. Eventually, you will have to pay the tax on it. The money in a FSA is tax free. There is never any tax on this money.
Jeff



Ah, good point. Thanks.
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Re: does it make sense to pass on the flex acct at work?

Postby Mitchell777 » Mon Dec 31, 2012 10:29 am

tfb wrote:
Mitchell777 wrote:I always struggle with how much to put into my FSA. This was the first year that I got to the end of the year and had almost a couple hundred dollars unused.

Even if you lose that a couple hundred dollars, you are better off than being too conservative and paying hundreds of dollars with after-tax money.

That is probably the case for a family where you contribute a good bit of money and know that someone in the family will probably be able to use it. For a single person with little in the way of known expenses each year, it may not be the case. If I contribute $400 pre tax, I save $112 in my tax bracket. Not a good investment if I lose $200, unless I only take that loss for one year.
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Re: does it make sense to pass on the flex acct at work?

Postby arthurb999 » Mon Dec 31, 2012 10:34 am

If you don't have a lot of medical expenses or forsee any in the immediate future, I would consider an HDHP with an HSA.

I would also request a card to be linked to your hsa to make it easy to pay for things.
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Re: does it make sense to pass on the flex acct at work?

Postby midareff » Mon Dec 31, 2012 10:58 am

I never used it personally as my medical/dental insirance was so comprehensive. Friends who did use it with larger families always seemed to end up scrambling at the end of the year to get glasses or other things they really were not on schedule for rather than lose the money.
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Re: does it make sense to pass on the flex acct at work?

Postby Bob's not my name » Mon Dec 31, 2012 11:09 am

Mitchell777 wrote:
tfb wrote:
Mitchell777 wrote:I always struggle with how much to put into my FSA. This was the first year that I got to the end of the year and had almost a couple hundred dollars unused.

Even if you lose that a couple hundred dollars, you are better off than being too conservative and paying hundreds of dollars with after-tax money.

That is probably the case for a family where you contribute a good bit of money and know that someone in the family will probably be able to use it. For a single person with little in the way of known expenses each year, it may not be the case. If I contribute $400 pre tax, I save $112 in my tax bracket. Not a good investment if I lose $200, unless I only take that loss for one year.
You have the math wrong. Please see the linked thread.
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Re: does it make sense to pass on the flex acct at work?

Postby Jay69 » Mon Dec 31, 2012 12:09 pm

All I can say is you’re not alone. The use it or lose it rule makes it just too tough for us a family of 4, some years we have many heath bills, some years hardly nothing but (4) $20 co-pays.

I have not been too good at predicting in advance when I’m going to need a crown or when one of the kids breaks a leg. I did plan to have each kid break their leg at different years but they both did it the same year, go figure.

In all serious how do you really plan for this, the use it or lose rule needs to go. In the real world we had one low year with about $150 and a high year of about $7,000 (can I say (2) crowns, root cannel + some other goodies) in eligible claims
"Out of clutter, find simplicity” Albert Einstein
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Re: does it make sense to pass on the flex acct at work?

Postby Bob's not my name » Mon Dec 31, 2012 1:00 pm

Jay69 wrote:In all serious how do you really plan for this, the use it or lose rule needs to go. In the real world we had one low year with about $150 and a high year of about $7,000 (can I say (2) crowns, root cannel + some other goodies) in eligible claims
It may indeed go, as discussed here viewtopic.php?f=10&t=101267 . But how will you be affected by the new $2,500 limit? Do you have access to two FSAs or just one? If you are limited to $2,500 the $7,000 tail is irrelevant. For many families the FSA cuts medical expenses in half, so if you put in the maximum $2,500 and you have a normal probability distribution centered at around $3,600, you will definitely come out way ahead over the years. Remember that you can come out ahead in a specific year even if you leave money unspent.
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Re: does it make sense to pass on the flex acct at work?

Postby Watty » Mon Dec 31, 2012 1:40 pm

JimEli wrote:FWIW, consider during a year in which employment is terminated (retirement, etc), the full amount of the FSA is available starting on January 1, regardless of contributions. I’m not aware of a mechanism to recover the spent FSA.



There isn't, this is the flip side to the "use it or lose it" rule.

If you have a large expense in January you will be reimbursed for your entire years amount of the flexible spending account all at once even though it has not been withheld from your paycheck yet.

If you then leave that job in February you do not need to pay it back.

At lease this is how it has worked in past years, there are a lot of changes going in this year so it would be good to double check on that.
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Re: does it make sense to pass on the flex acct at work?

Postby porcupine » Mon Dec 31, 2012 2:05 pm

555 wrote:
caroljm36 wrote:
555 wrote:I don't see how contributing to FSA or 401k could be considered alternatives.


"They both reduce taxable income. The way I am looking at it, it's still money I have to pay out of pocket, only with flex it is pre-tax, and you can spend ahead. But it's still my own money, not some insurance payout. So if I have cash set aside for copays and glasses, and put more in 401k, what's the diff?

I am used to the routine for getting reimbursements, so that's not the problem. I just have trouble guessing the amounts right and of course really like reducing my take-home pay. HSA is not available and flex is use-or-lose it."


So are you considering putting money into a 401k instead of going to the dentist? See my point?

I hope the original poster who wrote has not already responded; my take is that if you are not saving enough to be able to fully fund the 401(k), it is not worth it to have the FSA as well (unless you have a good sized stash of cash). Let's put some hypothetical figures here:

Paycheck = $2000
Max 401(k)/paycheck = $500 (remember, this is a hypothetical figure)
Expenditure/paycheck = $1600

In this situation, it does not make sense to have an FSA of, say, $200/paycheck (unless you have a stash of $200 times number-of-paychecks-per-year that you could fall back on). And then too, if you lose the job when you've put away $1000 in FSA, and have been to healthcare providers for only $100 worth of expenses, you lose the $900. Not a good prospect, is it?

On the other hand, for the situation above, if you borrow $100 per paycheck from your stash to make the max contribution towards your 401(k), that would be sensible (though the emergency cash would be slightly depleted at layoff time).

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Re: does it make sense to pass on the flex acct at work?

Postby caroljm36 » Mon Dec 31, 2012 2:24 pm

porcupine wrote:
I hope the original poster who wrote has not already responded; my take is that if you are not saving enough to be able to fully fund the 401(k), it is not worth it to have the FSA as well (unless you have a good sized stash of cash).

- Porcupine


I am the OP and that's what I thought. No way can I max the 401k but I would rather have the money there and pay out of pocket now than draw ahead on future pay. I'm just not in the tax bracket that can take advantage of every reduction to income.
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Re: does it make sense to pass on the flex acct at work?

Postby Ice-9 » Mon Dec 31, 2012 2:35 pm

I've used FSA (managed by two different companies) for the last two years and am not understanding the lack of love in this thread. :)

A few posters complain about the difficulty with paperwork and the waits for payments. Both companies that managed my FSA accounts offered ability to upload scans of receipts, just like when you upload a check to deposit at an online bank. Very easy to do both years with both companies. Also, both companies allowed direct deposit, and the payment always showed up in my account the payday after I submitted it. I've never experienced an unreasonable wait for FSA payment.

FSAs aren't for everybody, but they're very helpful if you have known impending medical expenses - contact lenses, large dental bills, regular doctor appointments, etc. I know some people offline who seem to have misunderstood it and were disappointed with it after arbitrarily signing up for $1000 or so and not using it all throughout the year. For the FSA to be useful, you MUST carefully plan out what you think your expenses will be. If you don't expect many expenses, it may not be worth the effort at all, but if you know you've got a few big medical items coming up during the year it's great.
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Re: does it make sense to pass on the flex acct at work?

Postby dianna » Tue Jan 01, 2013 12:39 am

zzcooper123 wrote:I forgot...can you have an FSA and HSA at the same time?


It depends ..... some major companies offer a LIMITED PURPOSE FSA that can be used for some expenses (e.g., dental, optical) at the same time that you have an HSA.
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Re: does it make sense to pass on the flex acct at work?

Postby grabiner » Tue Jan 01, 2013 12:51 am

dianna wrote:
zzcooper123 wrote:I forgot...can you have an FSA and HSA at the same time?


It depends ..... some major companies offer a LIMITED PURPOSE FSA that can be used for some expenses (e.g., dental, optical) at the same time that you have an HSA.


Also, you can have an HSA from a previous year even if you no longer qualify to contribute to it this year (because you have an FSA this year, or because your insurance isn't high-deductible).
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Re: does it make sense to pass on the flex acct at work?

Postby celia » Tue Jan 01, 2013 5:05 am

If your medical/child care expenses vary greatly from year-to-year such that you don't know what they will be for the next year, it is probably not a good idea to participate. However, if you know you will be spending at least a minimum amount each year (say $500), then sign up for that amount.

The hardest part for us the first year was trying to keep the receipts together. I started using a manila envelope to store all the receipts and kept it in the same spot all the time. At the end of the year, I would pull out the receipts, photocopy them, and mail them in with a required form. (Some years I just requested a year-long statement from the pharmacy or most-used doctors so I didn't have to worry about lots of little receipts.) I didn't want to think about it all year long. There's more important things in life.
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Re: does it make sense to pass on the flex acct at work?

Postby Bob's not my name » Tue Jan 01, 2013 6:11 am

celia wrote:If your medical/child care expenses vary greatly from year-to-year such that you don't know what they will be for the next year, it is probably not a good idea to participate. However, if you know you will be spending at least a minimum amount each year (say $500), then sign up for that amount.
Again, this is a bad strategy for the health FSA. Contribute more than the minimum. You can come out ahead even if you leave money unspent.
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Re: does it make sense to pass on the flex acct at work?

Postby Ice-9 » Mon Jan 07, 2013 6:51 pm

celia wrote:The hardest part for us the first year was trying to keep the receipts together. I started using a manila envelope to store all the receipts and kept it in the same spot all the time. At the end of the year, I would pull out the receipts, photocopy them, and mail them in with a required form. (Some years I just requested a year-long statement from the pharmacy or most-used doctors so I didn't have to worry about lots of little receipts.) I didn't want to think about it all year long. There's more important things in life.


This is the type of complaint about FSAs I am reading here that isn't jibing with my experience. I would not keep a manilla folder full of receipts all year long and do massive paperwork at the end of the year. I do exactly this:

1. Receive a receipt or statement
2. Scan it that very evening
3. Log onto FSA website
4. Make claim online and upload my scan
5. Receive the FSA payment via direct deposit the next payday
6. Throw out the receipts, don't need 'em anymore
7. Repeat each time I receive a medical receipt or statement until I reach the full annual amount

I realize the online handling of FSA accounts might have only started in the last few years, but I get the impression it's the norm now. And it's easy. :D
Last edited by Ice-9 on Tue Jan 08, 2013 9:30 am, edited 1 time in total.
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Re: does it make sense to pass on the flex acct at work?

Postby happymob » Tue Jan 08, 2013 9:16 am

In our case, the paperwork nightmare came from having to submit paperwork multiple times. In one case, we submitted it, it was rejected (due to a technical fault on our end). We resubmitted with correct stuff, it was rejected. We resubmitted with the exact same stuff and an explanatory letter, it was accepted. Moving a few thousand dollars of expenses to pre-tax is really, really nice, but the time my wife ended up spending on this only partially justified the savings. Had everything gone smoothly (no resubmitting the same stupid receipts to get compensated), I'd have a more positive feeling about these plans.
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Re: does it make sense to pass on the flex acct at work?

Postby GalaxyBoy » Wed Jan 09, 2013 12:41 am

I gave up on mine for the first time in years for the upcoming year. It was just too much of a PITA. Either the debit card wouldn't work, or they would require receipts to substantiate that the claim was an eligible expense, even when it was charged to "ABC Hospital" or "Dr. So-and-so Medical Practice." And the request for substantiation would come months after the bill was paid, and they would put a hold on the debit card account until the paperwork was approved. They finally made it easier by accepting scanned EOB's via a web site, but it just got to be too much. And I felt like I was buying glasses at the end of the year I didn't need, or the money ran out so fast it wasn't worth the trouble.

FWIW, my $0.02.
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Re: does it make sense to pass on the flex acct at work?

Postby supersharpie » Wed Jan 09, 2013 12:51 am

Keep in mind that by decreasing your FICA taxable income you are decreasing your future Social Security benefits, unless you have already maxed out your "High 35" that are used in the benefit computation.
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