Discussion:FSA question
From TaxAlmanac, A Free Online Resource
Note: You are using this website at your own risk, subject to our Disclaimer and Website Use and Contribution Terms.
From TaxAlmanac
Discussion Forum Index --> Basic Tax Questions --> FSA question
Discussion Forum Index --> Tax Questions --> FSA question
| 21 January 2008 | |
| I have a client who contributes the max into his flexible spending account. He is doing so again for 2008, even though he is currently receiving short-term disability pay through his employer. His short-term disability runs out in February and then he will have to wait until May for his long-term disability to kick in if he is unable to go back to work by then. He is considering spending down his FSA money of $5,000 for the year between now and the end of February for durable medical equipment that is tax deductible while he is still eligible to contribute tax-free and submit expenses. He won't be able to do so after that point. My question is - if he does not return to work and goes on LTD in May, if he has already received the entire $5,000 reimbursement but makes no further contributions for the year - will he have to pay back the difference between what he contributed and what he received as reimbursement? Has anyone seen this happen before? I would imagine this happens frequently when employees contribute to their FSA's, get reimbursed for amounts greater than what they contributed yet for the year, and then leave the company, thus being paid more than they contributed.
Any thoughts are appreciated . . . | |
| 21 January 2008 | |
| I would contact the plan administrator.
However, My guess would be that they would deduct the balance due from his last paycheck and/or he would have to pay them the diff. | |
| 21 January 2008 | |
| That's kinda my thoughts too, but I'm wondering if anyone has actually seen this with one of their clients and knows how it was resolved. | |
| January 21, 2008 | |
| By law the employer is not supposed to ask for reimbursement of those funds. It is a risk they take in order to have the pre-tax treatment. The employee also takes a risk in that he or she may not use the entire amount during the year and then have to forfeit the balance. This risk is one of the reasons employers usually limit the amount that employees can put in the plan.
While it is illegal, my former employer asked me to reimburse them for the portion of medical out-of-pocket funds used that had not yet been withheld from my paycheck. It probably happens in other places as well. | |
To join in on this discussion, you must first
log in.
