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Author: Wradical Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121444  
Subject: Re: FSA Frustration Date: 5/14/2008 12:01 AM
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"It's that way because it's the law (IRS rules)."
____________________________________________

Yes, I get that but what I don't understand is why no one else sees the stupidity of it.



With all due respect, it's not nice to call the rest of us stupid.
After all, you're the one who's out the $1,000.

You can be upset about the situation, but it's not our fault, and it doesn't make US stupid, NOR is the law. The law provides a very great employee benefit.

Guess too high and someone keeps your money. I think the plan management company keeps it. Guess too low and get no tax advantage.

OK, you do understand the rules. So the game plan is not to guess high.
You missed. NO, the 3rd-party-administrator doesn't keep your money. Your employer keeps the money.

So, really what are they accomplishing? It's really a dumb law.

Here's what "they" are accomplishing. You don't get to scam the system and determine your taxable compensation AFTER the year is over. It's too to make the required withholding adjustments at that point.

That's why you have to make the annual election in advance. You don't get to wait until the year is over, and then convert taxable wages into a tax-free benefit. That's in the too-good-to-be-true category.

And the rule that I think is too good to be true, but IS true, is that you can elect to take say, $3000 in medical benefits for the year, submit $3000 in claims the first month, and for 11 months you have an interest-free loan from your employer. And if you leave the company during the year, you don't have to pay it back. The employer is out the money. That's the flip side of the use-it-or-lose-it rule.

Bill


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