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This year is our first year using an FSA. We don't typically use the doctor, and our daughter's nursery school expenses are fairly small. This year, however, my husband needs some dental work, and we were convinced of the tax savings on this money, so we signed up. Essentially, it worked out that we would save enough in taxes that our daughter's child care would be "free".

Well, it was good in theory, I suppose.

In January, we got our first check. Hmm. We hadn't filed for reimbursement on anything, as we had no expenses at that time. I looked on the statement, and it said RX0039 or some such. Looking at the cost, I determined that we had just been reimbursed for my son's medications. He is disabled, and take seizure medications. The date was the same as when I had his prescription filled. We figured that it was hooked to our insurance somehow.

The problem comes because he is also on TEFRA Medicaid. We pay ~$40 to the state each month as a premium, and they cover all his medical bills after our primary insurance pays. We called up the FSA company, and explained this to them. The lady my husband spoke with told us not to worry about this first check, as it was so small (around $60), and that we'd use that amount soon anyway. We just shouldn't file again until we'd spent that much. She also put a note in our account about our son's medicaid, and told us they would not file anything until we sent in a claim form manually.

Imagine my shock today then, when I opened the mail and got a check for over $1000! I was expecting a check for my daughter's child care from them, but definately not for medical expenses! It seems, that once again, they had pulled the information from our insurance, and paid us back for my son's physical and occupational therapy for the last month.

While seeing that amount made me grateful at how much Medicaid helps us out, now I don't know what to do about this check! We are only allowed a $2000 medical FSA, and we were just reimbursed over half of it, for medical expenses we didn't have. Having this money in hand makes me very tempted to pay off a credit card, but I don't think that's a good idea :). Another thought is to put it in our savings account until we do need it for medical expenses.

I can guarantee that my husband will never have another FSA account again, which is too bad. And, it makes me look bad for telling him how great it would be :(.

So, does anyone have any advice as to what we should do about this reimbursment for medical expenses we didn't have?

Thanks so much!
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Sounds to me like you need to sit down with someone in HR and find out exactly how your company's FSA works.

Most of the problems I've heard with FSA's are them taking a long time to pay claims and losing the claim paperwork. This is a new one on me.

--Peter
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Sounds to me like you need to sit down with someone in HR and find out exactly how your company's FSA works.

Woohoohoo! Sorry! *gasp* Got to wipe the tears from my eyes from laughing so hard at that one! The HR people don't have a clue. They went round and round with my husband trying to get him to sign up for short term disability. No, no, says my husband, I've already got it.

Yes, yes, says they, and you need to pay for it.

No, no, it's part of my salaried benefits package.

What? You're salaried? Oh.

We couldn't even get the correct forms to sign up for the FSA until after the open enrollment ended. We were given the wrong forms to start with, and then, they didn't know how to use the new forms.

*sigh*

We'll call the FSA company Monday, but I don't know if it will do any good. :(
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We'll call the FSA company Monday, but I don't know if it will do any good. :(

Maybe you can ask the FSA company if they can turn off the automatic reimbursement and only reimburse when you submit for it. For our account, the dental claims are automatic but medical are not so I'm thinking there should be a way to code for it, BWDIK.

Good luck !

rad
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Got to wipe the tears from my eyes from laughing so hard at that one!

I really wish that weren't true. But you've found the reason many people I've talked to don't use an FSA.

They understand the tax savings. They understand the benefits. But their company's FSA is so badly managed that they don't want the hassles of dealing with them. They'd rather pay a few dollars more in tax than have to work with their FSA administrator.

Hopefully you'll have some luck with the FSA company itself.

--Peter
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Maybe you can ask the FSA company if they can turn off the automatic reimbursement and only reimburse when you submit for it. For our account, the dental claims are automatic but medical are not so I'm thinking there should be a way to code for it, BWDIK.

Ahh, but we tried that already, back in January, when we got the first unsolicited check. They said no problem, and that they wouldn't reimburse us for anything unless we submitted a claim form. Well, it seems that didn't work out.
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>> They understand the tax savings. They understand the benefits. But their company's FSA is so badly managed that they don't want the hassles of dealing with them. They'd rather pay a few dollars more in tax than have to work with their FSA administrator. <<

That or that they also understand that the benefits are use-it-or-lose-it in the year you paid into it, especially for unpredictable expenses like medical.

My current medical insurance -- new for this year -- is sort of a hybrid between a medical FSA and an HSA. The company pays $2,000 into the account for the two of us each year, we each have a $1,500 deductible (paid out by the account) and a total family out-of-pocket maximum of $3,000, and unused money can partially roll over into the next year (with a maximum of the total combined deductible -- in our case, $3,000). If we spent more than $2,000 but less than $3,000 this year, that comes out of our pocket. But if we rolled at least $1,000 into next year, we'd have no out-of-pocket exposure in 2006.

At least the employer is funding it and it partially rolls over, so it won't feel as tough to lose unspent money as it would in an FSA where the money comes out of our paycheck.

#29
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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.

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.

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.

I'd prefer a system where if they don't have a written and signed request FROM YOU, they don't send you a check.
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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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Guess what was in the mailbox today? That's right, another check from the FSA company for the remainder of our account. So, now, we have the entire disbursment here, and no medical expenses.

My husband called the company again, and they didn't have any record of our request to only pay claims that were submitted in writing, but that they would take care of it. The CS representative said that we should just send them back a check "for whatever you think we shouldn't have paid you", and they'll put it back into our account.

Unbelievable. So, tomorrow I have to go in and send of a certified letter with nearly two thousand dollars in it, and a request for them to not send us any more money! Let's hope it doesn't happen again :(.
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