Thursday, May 21, 2009

Flex Spending Accounts-Worth the Hassle?

I don't know exactly why, but my medical Flexible Spending Account administrators have suddenly become audit crazy.

The medical FSA is a great idea on paper. I am no tax expert so I will not attempt to explain them; the link above does a great job. But let's say I want to have $3,000. in the account at the beginning of the year. The administrator gives you (in our plan) a debit card and on January 1 the administrator loads 3,000. on the card. Each paycheck (and I am paid biweekly) they take a deduction out and at the end of the year they have taken out the $3,000. to fund the account. But you have the $3,000. in full to spend on January 1 and it is pre-tax. You can use the money on any qualified medical expense. Need to pay a doctor's co pay? Swipe the card. Need a prescription? Swipe the card.

Downside? Of course. If you don't spend the $3,000 (or whatever you put in) by the end of the year, it is lost. But (unfortunately) we don't have that problem.

This is the third year I've had the card. The administrator can audit anytime and I am OK with that. The first two years there was one audit (one bill) each. But for this year they have audited about 8 different receipts so far, and we are only in May. Who knows what else is to come. Not only that but two of the audited items were hospital bills I paid by mail, giving them my debit card number. So the date of service isn't even the date the hospital charged the card to pay my bill and how am I suppose to prove the date and the expense difference? Especially when one is for a $15 co pay and I have all these different doctors with $15 co-pays?

I had to dig a little to match up the services. This is going to be a major pain. Unfortunately my spouse and I both have several health conditions that require visits to doctors, blood work, etc. so this is not a one time problem. For Pete's sake that is why we got the card and joined up to begin with!

Let me make it clear, I'm very grateful for having health insurance and the FSA. So many people don't have health insurance now. I am truly fortunate. If I didn't have the health insurance the FSA would be even more of a "lifeline" because of you getting all the money to spend up front and "paying it off" in installments.

But still...leave it to the government to mess up a good thing that benefits many people who do have health problems.

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