LinkQUOTE
Spending Account Deadline: March 15
By Sandra Block
USATODAY.com
A Treasury Department ruling issued Wednesday will give workers with flexible spending accounts more time to spend their money before it disappears.
Health care flexible spending accounts allow workers to have pretax money deducted from their paychecks for out-of-pocket medical costs. Dependent care accounts allow workers to use pretax money to pay for child care.
But a use-it-or-lose-it provision forces participants to forfeit funds that aren't used by the end of the year to their employer.
The new ruling from the Treasury Department says employers with flexible spending accounts can give workers an extra 2½ months to spend the money.
"Rather than spending the money before New Year's Day, you'll have until March 15," says Joe Martingale, a health care strategy expert for consulting firm Watson Wyatt.
The extension will "ease the year-end spending rush prompted by the prior rule," Treasury Secretary John Snow said in a statement.
Flexible spending account supporters say the use-it-or-lose-it rule discourages many workers from using the accounts.
While about 22 million workers have access to the accounts, only about 7 million sign up, according to the Employers Council on Flexible Compensation. Workers who participate tend to put aside relatively small amounts.
In addition, the rule encourages participants to spend money on products and services they don't need, Martingale says.
A bill that would have allowed workers to carry over up to $500 in unused funds passed the House last year but failed to win Senate approval.
Last year, Iowa Republican Chuck Grassley, chairman of the Senate Finance Committee, asked Treasury to use its administrative powers to scrap the use-it-or-lose-it provision. Snow said Treasury doesn't have that authority.
In light of that debate, Wednesday's announcement "comes as kind of a surprise," Martingale says. "It doesn't grant the kind of change we were all hoping for, but it gives a modest amount of relief."
QUOTE
The new ruling from the Treasury Department says employers with flexible spending accounts can give workers an extra 2½ months to spend the money.
This does not appear to be an automatic extension though, right? This wording seems to say that employers have to choose to offer the extension. Still, I read this in the newspaper and had DH bring the article into work to get them thinking about the extension.
It would be wise to Double check with your Flex plan administrator, before assuming you have past Dec 31st to spend the money.
I would expect each plan will need to be amendend to allow for the extension that the Govenment has now "Allowed"
In any case it is an improvement.
I don't see why they don't make it more like the HSA, where any money you don't use for medical expenses can grow tax free until retirement.
Cheers
When I saw that title I just had to say "Beware the Ides of March!"
Double check to see if this applies to your plan...
Your employer has to opt to allow the extended deadline. My company did it for 2006 FSA and we were told up front (Nov 2005) that we had the extra 2 1/2 months. When I mentioned it to my brother he said his company opted not to do it because of the increased administrative fee.
carloscai
12-28-06, 12:55pm
It is not an automatice extension, you will have to negociate with your employer about this. In most cases, for the people like my company, they won't do a thing for you.
Oh, well, my dentist bills burn all the money anyways.
I decided not to do the FSA account for next year, but had one for 2006. I usually end up either losing some money, or spending it on crap I don't need in the week between Christmas and New Years just so the money doesn't evaporate. I actually did that this year, at Sam's Club a couple days ago. I now have one giant double "value pack" of just about every over-the-counter med ever produced (with simple descriptions like "acetomenophen" and "naproxen sodium" neatly listed next the the large prices for each item on the receipt).
Well, better than losing it altogether is what I figured (I don't need new glasses, my teeth work fine, etc.).
Like I said, for 2007 I just said no. Too much hassle, and I have yet to realize any real savings on things I actually need.
Now these can be really useful, if you or a covered person in your family will have very predictible and large health care expenses. An example would be a planned medical procedure that you know you are going to need that qualifies (such as dental work to use Carlos' example). Another example would be someone who has a recurring condition that requires a bunch of prescriptions on a regular monthly basis with large copays, or if someone is fighting a terrible disease, or something like that, but for the average healthy person, who does not take regular prescription meds, I just don't see the point.
Yes, the huge absurd spending spree on anything and everything remotely medical that is on the list of covered stuff you got from your employer (most of which you really don't need) at the end of the year can be sort of fun - until you remember that it was your money to begin with, and if you hadn't opted in, that money (or at least the after-taxes portion of it) could still be in your bank account.
Warshed
12-29-06, 12:56pm
I was considering getting involved in this, but I am not exactly sure how it works. Here is my situation:
Good medical PPO plan with 30$ co-pay, with a 500$ deductible, but I am getting a 75$ complete checkup which is out of pocket. I don't anticipate any health problems in the near future.
VERY crappy dental plan, but I anticipate having 2 wisdom teeth removed which isn't covered.
I am a healthy 26 year old and I was just wondering if you guys would suggest taking advantage of this FSA account. If you do, let me know how I go about it and what are the advantages.
Thank you
carloscai
12-29-06, 1:49pm
to my FSP, wisdom teeth removal is a valid expense. too bad I did it 2 years ago when I don't have the FSP.
the idea is estimating how much in eligible medical expenses you are going to have. Even if you just put aside $100 - assuming the taxes normally taken out is 30% - then the net effect on your income is $70 out of pocket instead of $100 out of pocket. That means if you had your $75 physical and 1 $30 copay - out of pocket $105 - if you had put $100 in the spending account would seem like $75 out of pocket instead of $105 out of pocket. You never get taxed on that money. You should check the list of over-the counter stuff that you might buy that is covered -- aspirin; cold remedies; bandaids. If you wear contact lenses - you can get cleaning supplies.
oops - forgot that your $500 deductible should be an eligible expense as well as the dental expenses. When I needed to get dental work done my dentist figured out how to split the work between 2 years - because there was also a limit of how much the plan paid within a year - I still went over but at least in the 2nd year I had put money in a fsa so I used pre-tax dollars to pay for the rest of the dental expenses.
carloscai
12-29-06, 3:21pm
Jade3's suggestions are very helpful. But be careful about spliting the expenses over 2 years...I am currently doing something that go through the year mark, but to my FSP, it's all about when you started it.
QUOTE(Nack @ 12-29-06, 1:18am)
I decided not to do the FSA account for next year, but had one for 2006. I usually end up either losing some money, or spending it on crap I don't need in the week between Christmas and New Years just so the money doesn't evaporate. I actually did that this year, at Sam's Club a couple days ago. I now have one giant double "value pack" of just about every over-the-counter med ever produced (with simple descriptions like "acetomenophen" and "naproxen sodium" neatly listed next the the large prices for each item on the receipt).
Been there, done that - two years ago while in Vegas we spent the better part of a week
trying to spend a thousand dollars. We still have stuff left from that excursion.
Ok so a certain amount of money is set aside for the FSA account by your employer, but how is it that you charge medical expenses to the FSA account? I mean do you have some sort of card, or what? I understand the of process of getting money into the FSA account, but how do you then use that money?
Goos had a card (a debit MC) that was attached to the account. He later had to submit the CRTs and was reimbursed with a check at a later date. The CRTs were to confirm the items purchased were actually eligible for payment.
YMMV
unsmart3d
12-29-06, 4:24pm
QUOTE(Warshed @ 12-29-06, 7:17pm)
how is it that you charge medical expenses to the FSA account?
Through my employer, we receive a MasterCard credit card and the amount we elect for the whole year is available January 1st. Let's say you have selected $50 per paycheck, and you get paid twice a month. Every paycheck, you will have a $50 deduction, but you can use up your $1200 the first week or whenever, maybe even on a planned expensive surgery. I can use the credit card at the grocery store (for approved items), at the doctor to pay for copays, etc.
Worked great for me!
EDIT: Make sure you save ALL receipts, since most of the time they will ask that you fax or mail the receipts to them to prove they are eligible FSA items. 
my company provides a debit card too but you can just save your receipts and file for re-imbursement. another thing about the fsa is that you can actually file for re-imbursement before all the money to cover the re-imbursement is taken out of your paycheck. = in splitting dental expenses over 2 years - i meant scheduling a root canal at the end of year 1 and the crown in the beginning of year 2 -
carloscai
12-29-06, 8:21pm
My company's FSP gave me squat. I have to pay first, and then mail-in all the receipts to some people in MN to get approved. I have got rejected once already, saying they want to know more about the surgery. After I provided all the insurance documents, they said they want the original credit card receipt, which I already sent them in the first mail.
Anyways, as Neal said, stay away from it if you don't really need that money. That's more difficult of getting that comparing to a CompUSA rebate.
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