By Reg Jones
Q: I am planning to retire next year and I am attempting to make my Flexible Spending Accounts open-season decision. I know that if I have money left in my FSA and do not have enough expenses before I retire, I lose that money. However, I don’t know what happens in the reverse situation: If I have received payments that exceed the amount that I have had deducted from my payroll, what happens? An example would be if I elected $2,500 for the year, had paid in $800 from payroll deductions but already had received $1,200 in claims when I retire. What happens with the difference?. What I get from FSAFEDS is that the government eats the difference. Is that correct ? Also, I assume even though I elected $2,500 for the year I am only responsible for what is deducted from the payroll before I retire. Correct?
A: Although I can find nothing that confirms your conclusion, I can’t find anything that says you are wrong. As far as I can tell, FSAFEDS will have to eat the loss. If anyone out there has a better answer, please let me know.
Michael Durgin Says:
September 30th, 2011 at 9:43 am
here’s what I found at the official FSAFeds site (www.fsafeds.com/fsafeds/summaryofbenefits.asp#FSAFEDSPlanYear). Note the last sentence, which should also apply to expenses below the full elected amount but above the amount deducted from pay:
What happens if I separate or retire before the end of the Benefit Period?
Your HCFSA or LEX HCFSA will terminate as of the date of your separation or retirement. There are no extensions. Any eligible health care expenses incurred prior to the date of separation will still be reimbursed but those incurred after the separation date are not reimbursable, even if you accelerated your allotments. If you used your entire elected amount before FSAFEDS has deducted it from your pay, you will not be responsible for the remaining allotments.