What Happens With a Flexible Spending Account if I Lose My Job?
A flexible spending account (FSA) or health savings account (HSA) is a way to save on taxes while setting money aside for health care if your employer offers a plan. You set money aside each paycheck that goes into this account. Then, you either submit receipts from approved health care expenses to get reimbursed, or, with some plans, you can use a special credit card to pay these expenses directly. Since this is an employee benefit, the FSA goes away in most instances if you lose your job.
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Continued Enrollment in FSA
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Unless you make other provisions, you generally cannot continue participating in a flexible spending account after you leave employment. Use of the account varies, though. In some instances, the plan stops immediately upon termination of employment and cannot be used anymore. With other plans, you may have until the end of the month to spend any money you have set aside.
COBRA Benefits
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When you leave a job, most employers with more than 20 employees must offer COBRA coverage. This allows you to purchase health care coverage at the employer's rate for up to 18 months. COBRA also applies to FSA benefits. If you leave your job, you can continue your contributions plus a 2 percent administrative charge to keep the plan active. You can do this for a couple of months and spend the remainder of the money you have contributed. You do not have to purchase your health insurance through COBRA to do this.
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Positive Balance in the Account
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If you leave employment with a positive balance in your FSA or HSA account and there are no provisions to use that amount either through COBRA or your company's policy, you will forfeit that amount. This is the same thing that happens when you leave a balance in your account at the end of the plan year. IRS provisions call for the money to be forfeited.
Negative Balance in the Account
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An HSA account allows you to spend more money than what you have contributed. If you have signed up to contribute $3,000 for the year, that full $3,000 is available to you on the first day of the plan year, even though you haven't contributed it yet. If you leave employment with a negative balance in your account, you are not required to pay the balance back.
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References
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- Photo Credit medicines and drugs image by Albert Lozano from Fotolia.com
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Comments
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You cannot use more than you have contributed with an HSA. You can only use it after you have contributed it to your account. An FSA is where as long as that's what you planned to contribute over the year, you can use before it's there.
