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First, whichever EMPLOYER you're getting this FSA through, be sure to tell THEM (specifically their HR benefits unit) about these problems. They won't directly fix the problem, of course, but they will raise heck with the company managing the FSAs and inform them that if they can't do the paperwork properly they shouldn't really expect to see the contract renewed - or perhaps even last as long as planned.

I don't know if it will do any good, but I'm having dh email his hr person. There is no hr person on night shift :).

Basically, fraud is occurring. (Note that I did NOT say that YOU are committing fraud. Or that anyone else is doing so. Just that it's occurring.) The nature of the fraud is that you are getting reimbursed for medical expenses that you aren't paying. It will be no big deal, in the long run, IF your medical expenses that you SHOULD get reimbursed for are over the amount you're having withheld from wages for the FSA. But if that doesn't happen... the fact is that you are the beneficiaries of this fraud.

When doing ANYTHING related to tax law, "Don't worry, it'll work out later" is generally bad advice.

I totally agree, which is why this worries me so much. The FSA Company is basically telling the government that we spent money, so we aren't paying taxes on it, but we didn't spend any money. But, there's definately no problem with us spending the money on medical care, eventually. It just really makes me uncomfortable.

Basically, you need to get the FSA managers to STOP looking at the insurance papers. At least in regard to your son. Tell them this IN WRITING, with a request for WRITTEN acknowledgement, and keep dated copies.

That's a great idea, and I'll draft a letter today.

The plot thickens, slightly, because I reviewed the paperwork they sent with the check. The first two pages were reimbursements for my son's therapies and medications, but on the last page, was reimbursement for 2 weeks of my daughter's nursery school. Instead of separating it out, they put it together into one big check. *sigh* My husband went to bed early this morning, so he won't be able to call them until this afternoon when he wakes up.

I guess, if nothing else, this is a good way to get the whole family in for an annual doctor appointment :P.

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