With an FSA, you elect a yearly contribution and all those funds are available for you to use from day one of the plan year but it is also a use it or lose it plan. So in other words, say on January 1 you elect a $1,200 annual FSA contribution that your employer will take as a deduction for on a pre-tax basis from each of your 24 bi-weekly pays over the year, i.e. $50 per pay. With an FSA you can use all $1,200 of that election on January 1 assuming that all of the $1,200 qualified expenses occurred on January 1. If you quit your job on January 2nd, your employer “eats” the balance and while some employers attempt to, they cannot legally recoup those deductions from you.
However if you contribute the whole $1,200 over the year and at December 31st, have incurred no qualified FSA eligible expenses or only a portion of those available funds, you lose the balance as it doesn’t carry over and the unused funds go back to your employer. On one had the employer takes a risk with an FSA that you will not use of more of the available funds than what you actually contributed to but OTOH, if you don’t use all of your elected funds, your employer keeps it. Over all it tends to balance out.
This is why you often see with folks with FSA’s, a late in the year rush of folks going to the doctors, getting new eye glasses and trying to get Rx’s filled near the end of the year as they are trying to spend down their balances. It’s also a good clue that an employee is getting ready to leave a company when at mid-year they are suddenly putting in an unusual amount of FSA claims.
With HSA’s OTOH, you can only use what has actually been contributed to date (those plans are not pre-funded) but then those unspent funds from year to year roll over from year to year and with HSA’s, the funds, including whatever the employer contributes if any are 100% portable and 100% owned by you.
Thanks to everyone for the useful info. I am 65, no longer
in a high deductible health insurance plan, covered by medicare and my wife’s employer for what medicaid does not cover. We do pay to have her employer cover me and I have the medicaid premium deducted from my SS check each month.
Thanks to everyone for the useful info. I am 65, no longer
in a high deductible health insurance plan, covered by medicare and my wife’s employer for what medicaid does not cover. We do pay to have her employer cover me and I have the medicare premium deducted from my SS check each month.