Are FSA's Worth the Hassle?

[txtig]

I've been contributing to FSA's (Flexible Spending Accounts) for several years through my employer. These accounts are used to pay certain qualified health care costs with pre-tax dollars. Depending on your tax bracket, the tax savings can be fairly significant, and the use of a FSA debit card makes the use of the funds pretty easy, as compared to filing claims to obtain reimbursement of eligible expenses.

But, . . . I'm now having second thoughts about whether I should continue to participate in this plan for several reasons. One, Obamacare has now limited FSA contributions to $2500 thereby limiting the potential tax savings. And, most significantly, I’m finding that I’m getting more and more requests from the FSA administrators for additional documentation on expenses that I have charged on my FSA debit card.

For me, the administrative hassle is reaching the point where I think I'd rather forego the savings rather than spend so much time digging up receipts to satisfy the FSA administrator's requests for documentation.

My FSA debit card is currently locked up because I’m late in submitting documentation to support a charge of a few hundred dollars to a local hospital. So, I've got money that I contributed to my account that I'm currently unable to use to pay current medical expenses. I'll be able to unlock the card as soon as I get a detailed receipt from the hospital, but the aggravation factor for me has reached the point where it’s no longer worth the hassle.

I'd appreciate other’s viewpoints on this issue and your experiences on using FSA's. Thanks.

 

[pb4uski]

I had FSAs for a number of years and they are a PITA. But I love my HSA.

 

[FinanceDude]

Leave it to the governement to muck up a perfectly good program that ran well for years..........

 

[JoeWras]

I had FSAs for a number of years and they are a PITA. But I love my HSA.

+1. HSA all the way. Carry over balances to the future. No accounting to some admin for each receipt. (Just save them in case you are audited, which is unlikely.)

 

[CoolChange]

This thread is already making me feel better about ignoring my FSA for the last couple of years. The combination of new limitations and increased hassle made me decide it was not worth pursuing; but, I had felt a bit guilty about leaving the money on the table.

When I look at the FSA qualified expenses I actually incurred over the last couple of years, it also makes me feel better: A new pair of glasses and a couple of teeth cleanings would have saved me less than $100 in taxes had I run them through a FSA rather than paying out of pocket.

I do have a fully funded HSA which I use as a kind of stealth IRA.

 

[rodi]

I always felt the medical FSA wasn't worth the risk of the "lose it" part of use it or lose it. We didn't have enough reoccurring expenses and overall are low health care consumers so not a lot of copays. That changed this year - my son got braces in December. So now I have an FSA to cover the monthly payments to the orthodontist. They deduct it each month, I submit my claim each month... easy peasy.

The only glitch in the system is that we are going through a corporate sell off. That means a mid-year switch in benefit plans - including DCA and medical FSA. Which would be fine except we don't know the exact close date (waiting on the DOJ approval). We're all guessing on what the close date is... since our bennies will transfer that day.

Plus - for the medical FSA - if you don't have enough qualified expenses by the close date you have to "lose" the money OR pay POST TAX money to COBRA the FSA long enough to have qualified expenses to pull out. It's a mess. It looks like the DCA FSA we'll be able to submit qualified claims to get the unused money up till the end of the year.

 

[travelover]

+1. HSA all the way. Carry over balances to the future. No accounting to some admin for each receipt. (Just save them in case you are audited, which is unlikely.)

+2 . DW has an FSA and we end up buying stupid stuff like prescription sun glasses or extra meds just to burn it up rather than lose it. HSA is great.

 

[jon-nyc]

We use a dependent care FSA without problems. It probably saves us 2k a year for an hour of effort.

 

[FIREd]

Between the use it or lose it part, the fact that we have very few qualified healthcare expenses, and the administrative minutia, I don't think a FSA is worth the hassle for us even though we are in a high tax bracket.

 

[JoeWras]

We use a dependent care FSA without problems. It probably saves us 2k a year for an hour of effort.

Is this the one where you target something specific, like braces? We can get that as an extra on our HSA plan. I could see this making sense. You know your kid is going to need braces, you know approx how much they'll cost. It is pretty cut and dried. This I can see the benefits of. Better yet, I can do it on top of my HSA.

 

[NanoSour]

I wholeheartedly agree that the FSA is a major PITA if you use it in a nickel and dime manor, i.e. paying for multiple uses throughout the year. The only time I used it was for my daughters braces. Paid for the entire thing in one payment and and cleared out the FSA account providing only one verification. Effectively got 1/3 off the braces.

I'll repeat this again when my next child needs braces. Other than that I'll leave the FSA alone.

 

[Texas Proud]

Leave it to the governement to muck up a perfectly good program that ran well for years..........

The major change that I saw was the limit... and the plans should run just as well now as before...

 

[JoeWras]

The major change that I saw was the limit... and the plans should run just as well now as before...

They also reduced the amount of items reimbursable. I used to be able to use up my FSA year end leftovers with over the counter drugs such as aspirin, band aids, etc. However, ACA changed that: Affordable Care Act: Questions and Answers on Over-the-Counter Medicines and Drugs

Effective Jan. 1, 2011, distributions from health FSAs and HRAs will be allowed to reimburse the cost of over-the-counter medicines or drugs only if they are purchased with a prescription.

I wholeheartedly agree that the FSA is a major PITA if you use it in a nickel and dime manor, i.e. paying for multiple uses throughout the year. The only time I used it was for my daughters braces. Paid for the entire thing in one payment and and cleared out the FSA account providing only one verification. Effectively got 1/3 off the braces.

I'll repeat this again when my next child needs braces. Other than that I'll leave the FSA alone.

Right. And the beauty of my HSA plan is you can add a limited purpose FSA on top of it, specifically for a limited set of items, one being braces.

 

[Texas Proud]

Heck, I guess I am the only one who likes it and uses it regularly...

I do not do the full amount that is available, but do know people who do...

For me it is just like a credit card (heck it IS a CC)... when I go to the doc and they say '$50', I just hand them the CC... when I get prescriptions, I just run the CC... the store determines what is eligible and what is not... I have been at this company 5 years and have only had to provide backup info once...

I think it is an easy way to save hundreds of $$s, not many out there so why pass this one up..

NOW, if you do not go to the doc or the dentist... do not have prescriptions... do not have glasses... then it might not be something for you....

 

[heeyy_joe]

Have used FSA for many years. No issues. Wouldn't dream of not taking advantage of that tax advantage.

 

[jon-nyc]

Is this the one where you target something specific, like braces? We can get that as an extra on our HSA plan. I could see this making sense. You know your kid is going to need braces, you know approx how much they'll cost. It is pretty cut and dried. This I can see the benefits of. Better yet, I can do it on top of my HSA.

Dependent care is for nanny, daycare, etc, even in-home care for elderly. But same idea, we know the expenses in advance so its easy to file for the maximum (5k).

 

[Texas Proud]

They also reduced the amount of items reimbursable. I used to be able to use up my FSA year end leftovers with over the counter drugs such as aspirin, band aids, etc. However, ACA changed that: Affordable Care Act: Questions and Answers on Over-the-Counter Medicines and Drugs

I agree, but that did not change it to where it is 'mucked up'.... it still works great for all the other items...

Yes, I had done the OTC run at year end before.... heck, I even put in a claim for miles driven to the doc and dentist... (which I still think you can do).... so yes, this is something I miss, but so be it....

 

[meekie]

Not being able to do OTC medications anymore (without a Dr's note and more hoops) was a huge loss to us, DH has a lot of OTC meds, and it was great to be able to stock up at the end of the year. It also allowed me to buy stuff for my parents.

We switched providers this year, which I'm glad for, the old one was a pain, and I got my card locked often. I'm hoping this new one is better.

Even so, it looks like I'll likely be leaving some money on the table this year since I wasn't as organized as I should have been.

 

[JoeWras]

For me it is just like a credit card (heck it IS a CC)... when I go to the doc and they say '$50', I just hand them the CC... when I get prescriptions, I just run the CC... the store determines what is eligible and what is not... I have been at this company 5 years and have only had to provide backup info once...

There you go! You have a great administrator!

Even though we have the credit card, my administrator brow-beats you for back up data. They require this to be FAXed in. Yes, fax. They lose the faxes. They ask for resubmits. It is very, very tiring.

I haven't had to do it for the last two years, but people in the cubes next to me say it has actually gotten worse, not better.

Ridiculous. You have the credit card and it requires all this followup paper work.

 

[Texas Proud]

There you go! You have a great administrator!

Even though we have the credit card, my administrator brow-beats you for back up data. They require this to be FAXed in. Yes, fax. They lose the faxes. They ask for resubmits. It is very, very tiring.

I haven't had to do it for the last two years, but people in the cubes next to me say it has actually gotten worse, not better.

Ridiculous. You have the credit card and it requires all this followup paper work.

I have to agree with that... to me, a bill from the doc or dentist and especially a hospital should be enough 'proof' for them...


And we are talking about YOUR money.... not the companies money.... so as long as you are following the rules, it should be easy....

 

[txtig]

Seems like a few folks here are having a pretty easy time complying with the paperwork, while others (like me) find it pretty onerous. I know there are a lot of different third party companies that adminitser these plans and I'm guesing they require different levels of documention (although you would think they would be similar since they're all trying to comply with the same federal rules). I will be opting out next year and hate to lose the savings, but will feel much better that I'm not having to jump through hoop after hoop just for the privledge of spending my own money.

 

[Sesq]

Mine requires paperwork for everything, so I only use it for big ticket years (Lasik in 2012). I also stopped using their debit card. If I have to submit the paperwork anyways I might as well scoop the miles and be reimbursed. That process actually, psychologically went smoother since for some reason a reimbursement seems like found money, whereas documenting a claim, when they can see quite easily that the charge came out of a doctors office seems like a hassle. Go figure.