- Bargaineering - http://www.bargaineering.com/articles -

Employer Trying To Get FSA Overspend

I was recently stumped by this recent reader question about Flexible Spending Accounts and was hoping someone here could shed some light on it.

I recently read an article dated May 10, 2005 about Flexible Spending Accounts [3]. You stated that “If you leave the company at any time.., you aren’t required to pay back the amount you’ve already spent and your employer foots the bill.” Where did you get that information? My husband is leaving his job after 6 months and we have already used the money from his account. His company is trying to tell him that he has to pay this money back. Do you know if there is an official IRS regulation or anything else that we can site? We are afraid that they are going to take it out of his last paycheck. Can they do that? How can we stop them?

When I scoured the IRS.gov site about Flexible Spending Arrangements, I could only find the “use-it-or-lose-it” provision but not anything about paying back an FSA overspend. I could only recall from my own experience and those of people I’ve talked to about this as my backup but didn’t know if there was some codified rule out there I was just missing. The reader’s husband is leaving this Friday and was hoping to have some good ammunition to fight the company so if you know of anything, please do share either via email or in the comments below.