Comments on: Your Take: The FSA Loophole http://www.bargaineering.com/articles/your-take-the-fsa-loophole.html personal finance blog with anecdotes, advice and commentary. Sun, 08 Nov 2009 14:07:29 -0500 http://wordpress.org/?v=2.8.5 hourly 1 By: CyberOwl http://www.bargaineering.com/articles/your-take-the-fsa-loophole.html/comment-page-1#comment-291419 CyberOwl Mon, 10 Nov 2008 03:34:27 +0000 http://www.bargaineering.com/articles/?p=3219#comment-291419 Just a follow-up to my situation. I had a balance of $3K in my FSA. I quit in July and found out that I had to spend the balance by my last date at my former job. I could continue it by paying for the FSA monthly payments thru Cobra. So I paid $450 for a month for the FSA payments. But I spent my balance and more. I got orthodontal work that totalled $4700. My max FSA contribution per year was $5K. So I got an extra $1250 in medical FSA spending ( $4700 - $3K - $450 ). Nice loophole! Just a follow-up to my situation.

I had a balance of $3K in my FSA. I quit in July and found out that I had to spend the balance by my last date at my former job. I could continue it by paying for the FSA monthly payments thru Cobra.

So I paid $450 for a month for the FSA payments.

But I spent my balance and more. I got orthodontal work that totalled $4700. My max FSA contribution per year was $5K. So I got an extra $1250 in medical FSA spending ( $4700 – $3K – $450 ).

Nice loophole!

]]> By: Electricute http://www.bargaineering.com/articles/your-take-the-fsa-loophole.html/comment-page-1#comment-291401 Electricute Sun, 09 Nov 2008 20:01:56 +0000 http://www.bargaineering.com/articles/?p=3219#comment-291401 I have to agree with posters like Peter, CK, Amy and FiveNickel.com. I found out about the “loophole” simply by calling my benefits hot line and asking questions. Our conversation and a bit of critical thinking led me to ask the right questions and they verified this situation. Many people feel this is an ethical issues but I don't see it like that at all. I plan to take 100% advantage of this plan feature next year. I do not feel guilty, I feel educated. I have also learned from this Blog that it is always SAFEST TO USE YOUR MONEY TOWARDS THE BEGINNING OF THE YEAR. Especially when the job market is down and layoffs are common. Everyone reading this blog should take note of that! Let other peoples misfortune be a lesson learned to us all. (Sorry to hear about that too! I dont agree with use-it-or-lose-it but that is a different issue) Kevin, I am really trying to see your side of it because I am big on ethics...but like I said, I don't feel at all as if this is an ethical issue, and I do not feel bad about creating my legal exit strategy that was verified legit by my benefits provider. Thank you all for the discussion. Keep it coming! I have to agree with posters like Peter, CK, Amy and FiveNickel.com. I found out about the “loophole” simply by calling my benefits hot line and asking questions. Our conversation and a bit of critical thinking led me to ask the right questions and they verified this situation.
Many people feel this is an ethical issues but I don’t see it like that at all.
I plan to take 100% advantage of this plan feature next year. I do not feel guilty, I feel educated.

I have also learned from this Blog that it is always SAFEST TO USE YOUR MONEY TOWARDS THE BEGINNING OF THE YEAR. Especially when the job market is down and layoffs are common. Everyone reading this blog should take note of that! Let other peoples misfortune be a lesson learned to us all. (Sorry to hear about that too! I dont agree with use-it-or-lose-it but that is a different issue)

Kevin, I am really trying to see your side of it because I am big on ethics…but like I said, I don’t feel at all as if this is an ethical issue, and I do not feel bad about creating my legal exit strategy that was verified legit by my benefits provider.

Thank you all for the discussion. Keep it coming!

]]> By: Cyberowl http://www.bargaineering.com/articles/your-take-the-fsa-loophole.html/comment-page-1#comment-290801 Cyberowl Fri, 31 Oct 2008 18:45:39 +0000 http://www.bargaineering.com/articles/?p=3219#comment-290801 Rob, No you cannot. I had the same question and the Cobra people said that I could not pay COBRA premiums with my FSA balance. Rob,

No you cannot. I had the same question and the Cobra people said that I could not pay COBRA premiums with my FSA balance.

]]> By: Rob http://www.bargaineering.com/articles/your-take-the-fsa-loophole.html/comment-page-1#comment-290792 Rob Fri, 31 Oct 2008 15:21:46 +0000 http://www.bargaineering.com/articles/?p=3219#comment-290792 Can I pay my COBRA premiums with the balance of my FSA account thanks Rob Can I pay my COBRA premiums with the balance of my FSA account

thanks

Rob

]]> By: Anonymous http://www.bargaineering.com/articles/your-take-the-fsa-loophole.html/comment-page-1#comment-289606 Anonymous Mon, 13 Oct 2008 20:11:12 +0000 http://www.bargaineering.com/articles/?p=3219#comment-289606 I need some help on this subject ASAP. I pledged $2,000 for this years' FSA, while working for the City. In January, I had an emergency room expense, using $590 from my FSA. I got laid off on February 14, having only put $260 into the FSA via salary deductions. I didn't hear anything about my negative FSA balance, upon leaving. I was unemployed for 6 months and get hired back by the City. I pledged another $250 for the remainder of the year. I've been there 2 months now and I got a letter yesterday telling me I had a negative balance and they were going to garnish my checks for the remainder of the year to recoup there loss. End of story, no discussion. I'm questioning whether they can take it upon themselves to just "garnish" my check without my authorization and whether they are even able to expect reimbursement of these funds. Please help me.. I need some help on this subject ASAP.
I pledged $2,000 for this years’ FSA, while working for the City.
In January, I had an emergency room expense, using $590 from my FSA.
I got laid off on February 14, having only put $260 into the FSA via salary deductions.
I didn’t hear anything about my negative FSA balance, upon leaving.
I was unemployed for 6 months and get hired back by the City. I pledged another $250 for the remainder of the year.
I’ve been there 2 months now and I got a letter yesterday telling me I had a negative balance and they were going to garnish my checks for the remainder of the year to recoup there loss. End of story, no discussion.
I’m questioning whether they can take it upon themselves to just “garnish” my check without my authorization and whether they are even able to expect reimbursement of these funds.
Please help me..

]]> By: Peter http://www.bargaineering.com/articles/your-take-the-fsa-loophole.html/comment-page-1#comment-280791 Peter Mon, 08 Sep 2008 18:44:06 +0000 http://www.bargaineering.com/articles/?p=3219#comment-280791 I believe that is dependent on your employer. It is not an IRS rule. They employer is allowed to offer just FSA Cobra without the full health insurance package, but they do not have to. I believe that is dependent on your employer. It is not an IRS rule. They employer is allowed to offer just FSA Cobra without the full health insurance package, but they do not have to.

]]> By: Cyberowl http://www.bargaineering.com/articles/your-take-the-fsa-loophole.html/comment-page-1#comment-280786 Cyberowl Mon, 08 Sep 2008 18:26:06 +0000 http://www.bargaineering.com/articles/?p=3219#comment-280786 I have to enroll for Cobra and FSA Cobra, right? I don't think I can just sign up for FSA Cobra without signing up for Cobra. I think it's a package deal. I have to enroll for Cobra and FSA Cobra, right?

I don’t think I can just sign up for FSA Cobra without signing up for Cobra. I think it’s a package deal.

]]> By: Peter http://www.bargaineering.com/articles/your-take-the-fsa-loophole.html/comment-page-1#comment-280233 Peter Sat, 06 Sep 2008 13:52:55 +0000 http://www.bargaineering.com/articles/?p=3219#comment-280233 Again, I'm no expert, but I think the answer to your question is yes. You do *not* need not pay the full premium for Cobra health insurance. You only need to enroll in FSA Cobra and continue to make your FSA contribution to your old employer (plus a 2% administrative fee). As long as you are making your monthly payment and are enrolled in the FSA plan, it makes no difference if you are employed by that company or not. You can submit FSA claims up to the full amount of your annual contribution. Again, I’m no expert, but I think the answer to your question is yes. You do *not* need not pay the full premium for Cobra health insurance. You only need to enroll in FSA Cobra and continue to make your FSA contribution to your old employer (plus a 2% administrative fee). As long as you are making your monthly payment and are enrolled in the FSA plan, it makes no difference if you are employed by that company or not. You can submit FSA claims up to the full amount of your annual contribution.

]]> By: Cyberowl http://www.bargaineering.com/articles/your-take-the-fsa-loophole.html/comment-page-1#comment-280088 Cyberowl Sat, 06 Sep 2008 00:22:43 +0000 http://www.bargaineering.com/articles/?p=3219#comment-280088 I am in a similar situation like Nathan. I had a balance in my FSA, almost 3K. I didn't know I could exploit this loophole that is being discussed here so I waited until I thought the FSA balance was high enough to get some needed dental work (veneer, orthodontal). Looking back, I should have just gotten the dental work in Jan. Come July, I found a better job. The new company made me an offer I couldn't refuse. So I took it and quit my old company (I didn't get laid off like Nathan did). Now I find out that I cannot access my FSA balance unless I pay for Cobra thru my former employer even though I have medical coverage with my new employer. The Cobra is $450/month, not cheap. While on Cobra, I have contribute to the FSA, with after-tax payments, if I want to still use my FSA balance. Does anyone know the answers to the following questions? I've consulted with my tax account, my HR person at my old company, the HR person at my new company, the Cobra adminstrator, and the FSA administrators. They all gave me the runaround and referred me to somebody else in this subgroup. Q1) Can I just pay for Cobra for one month, then spend the balance of my FSA and then quit Cobra and the FSA? Is there anything that requires me to continue in the FSA plan for the whole plan year? My whole plan year is from Jan. to Dec. 2008. That means $1800 in Cobra payments for me. Q2) My total contribute so far is about $3K. I expensed some prescription and a dental visit from FSA so I did use a little of it. Can I expense the full $5K even though I haven't contributed all of it yet, then just quit the Cobra/FSA plan and leave a negative balance on my FSA? The loophole being discussed here is starting an FSA, using up all the coverage, an then quitting, which leaves a negative balance on the FSA that the employee need not pay. My situation is different. I want to leave a negative balance on the FSA while it is being administered thru Cobra. I'm not sure if this is possible. I might have to talk to the IRS about this as a last resort. If anyone has answers, please reply. I'm stumped here. I am in a similar situation like Nathan. I had a balance in my FSA, almost 3K. I didn’t know I could exploit this loophole that is being discussed here so I waited until I thought the FSA balance was high enough to get some needed dental work (veneer, orthodontal). Looking back, I should have just gotten the dental work in Jan.

Come July, I found a better job. The new company made me an offer I couldn’t refuse. So I took it and quit my old company (I didn’t get laid off like Nathan did).

Now I find out that I cannot access my FSA balance unless I pay for Cobra thru my former employer even though I have medical coverage with my new employer. The Cobra is $450/month, not cheap. While on Cobra, I have contribute to the FSA, with after-tax payments, if I want to still use my FSA balance.

Does anyone know the answers to the following questions? I’ve consulted with my tax account, my HR person at my old company, the HR person at my new company, the Cobra adminstrator, and the FSA administrators. They all gave me the runaround and referred me to somebody else in this subgroup.

Q1) Can I just pay for Cobra for one month, then spend the balance of my FSA and then quit Cobra and the FSA? Is there anything that requires me to continue in the FSA plan for the whole plan year? My whole plan year is from Jan. to Dec. 2008. That means $1800 in Cobra payments for me.

Q2) My total contribute so far is about $3K. I expensed some prescription and a dental visit from FSA so I did use a little of it. Can I expense the full $5K even though I haven’t contributed all of it yet, then just quit the Cobra/FSA plan and leave a negative balance on my FSA?

The loophole being discussed here is starting an FSA, using up all the coverage, an then quitting, which leaves a negative balance on the FSA that the employee need not pay.

My situation is different. I want to leave a negative balance on the FSA while it is being administered thru Cobra. I’m not sure if this is possible.

I might have to talk to the IRS about this as a last resort.

If anyone has answers, please reply. I’m stumped here.

]]> By: Nathan http://www.bargaineering.com/articles/your-take-the-fsa-loophole.html/comment-page-1#comment-274404 Nathan Fri, 08 Aug 2008 23:32:26 +0000 http://www.bargaineering.com/articles/?p=3219#comment-274404 Thanks I'll look into it. Thanks I’ll look into it.

]]> By: Peter http://www.bargaineering.com/articles/your-take-the-fsa-loophole.html/comment-page-1#comment-274402 Peter Fri, 08 Aug 2008 23:25:37 +0000 http://www.bargaineering.com/articles/?p=3219#comment-274402 I'm no expert, but I believe there is a way to just continue the FSA contributions without getting full health benefits. Of course, this might vary from plan to plan. I’m no expert, but I believe there is a way to just continue the FSA contributions without getting full health benefits. Of course, this might vary from plan to plan.

]]> By: Nathan http://www.bargaineering.com/articles/your-take-the-fsa-loophole.html/comment-page-1#comment-274400 Nathan Fri, 08 Aug 2008 23:16:39 +0000 http://www.bargaineering.com/articles/?p=3219#comment-274400 Peter, thanks for the response. If you're still tracking this post, maybe you could clarify this for me. Are you saying I can continue just the FSA benefits or would I have to get the full insurance coverage too? In that case, it wouldn't really be worth it to me. Peter, thanks for the response. If you’re still tracking this post, maybe you could clarify this for me. Are you saying I can continue just the FSA benefits or would I have to get the full insurance coverage too? In that case, it wouldn’t really be worth it to me.

]]> By: Peter http://www.bargaineering.com/articles/your-take-the-fsa-loophole.html/comment-page-1#comment-271933 Peter Mon, 28 Jul 2008 17:58:13 +0000 http://www.bargaineering.com/articles/?p=3219#comment-271933 Nathan, if this happened less than 60 days ago, you are entitled to continue the benefits through Cobra. You would continue paying the monthly FSA contribution you've been making, plus a 2% surcharge. You can then continue to draw funds, including the additional contributions you've made since you were laid off. Just keep doing this until the end of the year and you should be able to use the entire $3000 Nathan, if this happened less than 60 days ago, you are entitled to continue the benefits through Cobra. You would continue paying the monthly FSA contribution you’ve been making, plus a 2% surcharge. You can then continue to draw funds, including the additional contributions you’ve made since you were laid off. Just keep doing this until the end of the year and you should be able to use the entire $3000

]]> By: Nathan http://www.bargaineering.com/articles/your-take-the-fsa-loophole.html/comment-page-1#comment-271930 Nathan Mon, 28 Jul 2008 17:50:47 +0000 http://www.bargaineering.com/articles/?p=3219#comment-271930 The "loophole" worked against me. When I was laid off last month without notice, my employer got to keep $1200 of my own money I had not yet used. I had contributed the maximum amount ($3000) to pay for an upcoming surgery and lost pretty much all I had put in (I am in the middle of the lengthy appeal process now). The “loophole” worked against me. When I was laid off last month without notice, my employer got to keep $1200 of my own money I had not yet used. I had contributed the maximum amount ($3000) to pay for an upcoming surgery and lost pretty much all I had put in (I am in the middle of the lengthy appeal process now).

]]> By: jim http://www.bargaineering.com/articles/your-take-the-fsa-loophole.html/comment-page-1#comment-271890 jim Mon, 28 Jul 2008 14:35:37 +0000 http://www.bargaineering.com/articles/?p=3219#comment-271890 <a href="http://en.wikipedia.org/wiki/Learned_Hand" rel="nofollow">Judge Learned Hand</a> once said : "Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one's taxes. Over and over again the Courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do right, for nobody owes any public duty to pay more than the law demands." Judge Learned Hand once said : “Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one’s taxes. Over and over again the Courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do right, for nobody owes any public duty to pay more than the law demands.”

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