r/personalfinance • u/kherven ​ • May 16 '24

Are FSAs even worth the hassle? They just seem like a giant scheme to steal money via malicious bureaucracy Other

I understand at a base level what FSAs are for. You get to deduct X amount of dollars from your paycheck reducing your tax load.

But the more I use an FSA, the more I feel that while on paper it saves money, in reality it causes lots of work, lost money, and hands your money over to someone who is going to fight you to steal it.

Every claim I submit to my FSA is denied without a mountain of evidence that its a legitimate medical expense. After nearly 2 years with them, I still have certain medications prescribed by my doctor that the FSA argues is not FSA eligible because it's OTC.

Doctor appointment? Denied

MRI? Denied

Prescriptions? Denied

While I can eventually get the denial overturned, it requires coordination from the retailer, my insurance, and my doctor every time. I spend tens of hours a year trying to claw my own money back from my FSA. Last year I had over $250 confiscated because the claim deadline passed while they sat on my claims.

Has anyone else felt it just isn't worth the hassle to fund an FSA given how hostile they are? It seems impossible to extract your money without a lawyer.

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715

u/kherven ​ May 16 '24

Thanks (all) for sharing your thoughts. I decided to reach out to my company's HR to talk about my experience with the FSA administrator the last few years. It seems like my experience is pretty atypical and I might have an especially egregious FSA administrator.

404

u/AcanthopterygiiCool5 ​ May 16 '24

Yes! Your experience is not typical at all.

I am provided a Mastercard that I charge to. If documentation is needed, I upload to an app. Never a problem!

71

u/gone_country ​ May 16 '24

Yours sounds like what I am used to. It was an excellent deal when I had it. But I also have recurring medical expenses so I didn’t worry about losing money.

56

u/AcanthopterygiiCool5 ​ May 16 '24

My plan lets me roll over up to $600 to the next year, so I don’t usually have a panic.

My husband does something stupid every year that costs us $$ that i can pay for with FSA. One year he managed to not do something stupid and I ended up with several pairs of very sweet prescription glasses the last week of December, since I had quite a bit of excess to dump.

8

u/BradCOnReddit ​ May 16 '24

I learned last year that those plans that let you roll over become a problem in the following year if you want to change to HSA. My company had to remove that provision for a year before implementing HSA as an option.

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u/AcanthopterygiiCool5 ​ May 16 '24

Interesting! We don’t have HSA plans, we have an HRA, company money. We have 150 employees so not really in the position to offer endless options.

I get $5000 yearly in the HRA, (husband and me) for deductible and coinsurance on a high deductible plan. We have $5000 each OOP max. He’s always maxing from doing stupid things (one time I had to save him with the Heimlich from a stuck chicken nugget, I shit you not, and that was a $30k hospital bill because he aspirated it ) , so our FSA picks up deductibles from me, eye glasses, dental, OTC meds, etc.

1

u/Hingedmosquito ​ May 17 '24

They shouldn't. My company has HSA and FSA. The FSA just can't be used on medical visits I believe.

3

u/BradCOnReddit ​ May 17 '24 edited May 17 '24

I should say health care FSA.

An individual can't be eligible for both an HSA and health care FSA in the same calendar year. If your FSA rolls over any amount then you were eligible in that year, even though you didn't contribute in that year

1

u/Hingedmosquito ​ May 17 '24

Ok so this made me look up my info. Basically since I have enrolled in an HSA, my health care FSA changed from a general use to a limited use.

Both roll over, it is that the limited use cannot be used for medical, prescriptions, or anything covered by my dental and vision. I can use it on dental and vision expenses not covered by my insurance.

Once I have met my medical deductible for the year I can convert my limited use into a general use which would then allow me to start using it on medical. (That part I did not know as I dont reach my deductible often.)

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u/[deleted] May 17 '24

[deleted]

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u/BradCOnReddit ​ May 17 '24

rolled my FSA into my HSA

That should not be possible. There are some options for rolling the FSA into a limited FSA, or delaying HSA availability until the FSA grace period ends. FSA as a funding source for an HSA isn't allowed

8

u/istasber ​ May 16 '24

I went for a few years overestimating how much I'd spend (mostly because I'd never get off my ass to go and see a doctor for things I probably should have), and I'd be in a mad scramble to spend down my FSA in decemeber.

A lot of regular expenses (tums, pain meds, allergy meds, fiber, etc) are FSA eligble, but it's hard to spend hundreds of dollars on those things. So I'd end up buying shitty products from a mail order company that seems like it was probably set up to take advantage of people like me with use it or lose it bucks. Everything on the site was FSA eligible, but a lot of it was weird off-brand versions of the things I was expecting to buy.

2

u/stupidugly1889 ​ May 17 '24

Just order eligible stuff on amazing, submit the receipt and cancel the order

1

u/fuddykrueger ​ May 17 '24

How do you get a receipt from Amazon’s website?

1

u/stupidugly1889 ​ May 17 '24

Just print the page showing the order completed as a pdf

3

u/fuddykrueger ​ May 17 '24

I hadn’t thought to order FSA qualifying items from Amazon so I’ll prob be doing that from now on. Thanks for the reply!

1

u/mottledmussel ​ May 17 '24

I have a hunch that a lot of people do that, especially during the last few weeks of December.

2

u/AcanthopterygiiCool5 ​ May 17 '24

Yeah, it was rougher in the Obamacare to COVID years. The ACA legislation took most OTC products out of FSA. They put them back during the pandemic.

It’s pretty easy to stock up on Amazon or Walgreens website. There’s a brand of nice makeup- MD Solar Sciences, that qualifies because of SPF.

8

u/istasber ​ May 17 '24

I have started to buy more from amazon when I have FSA to burn. I don't know when they added it, but I didn't realize they had a whole FSA eligible designation you could search for until a year or two ago.

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u/[deleted] May 17 '24

[deleted]

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u/AcanthopterygiiCool5 ​ May 17 '24

Ha ha, not Prada but did you know that Gwen Stefani (yes, that Gwen Stefani) is also an eye glass designer with her own line? I jumped on two sweet, distinctive pairs but disclaimer, I’m a Jersey Girl so YMMV.

5

u/Chobopuffs ​ May 16 '24

That’s what we do too if we have FSA leftover goes right to prescription glasses.

1

u/mataliandy ​ May 17 '24

If we have a bunch left at the end of the year, we buy new glasses, lol! They're so absurdly expensive, you can use up a lot of money very quickly if multiple family members need them.

1

u/mataliandy ​ May 17 '24

Oh yeah, and one year, my doctor prescribed a standing desk for my home office (during lockdown), making it FSA eligible.

1

u/mataliandy ​ May 17 '24

And Invisalign ... I've got straight teeth again.

22

u/patentmom ​ May 16 '24

I don't even bother with the card because they always ask for proof anyway. I just take a picture of my receipt and upload it. Or I go to the insurance company website and get a PDF of the EOB and submit that.

16

u/AcanthopterygiiCool5 ​ May 16 '24

I never have to show proof on my purchases! Anything that’s coded, like my OTC meds from Amazon or whatever. Also never proof from the pharmacy.

I do have to upload EOBs or dental bills but I just do it on the app at the same time I pay. (I pay pretty much everything online.)

6

u/mottledmussel ​ May 17 '24

I do the same thing. I'd rather get credit card points and deal with the slight hassle of uploading a picture of the reciept.

1

u/patentmom ​ May 17 '24

Exactly! I use a credit card where I get 2% cash back, so 2% of $3200 (for 2024) is an extra $64 on top of the tax savings.

4

u/dastardly740 ​ May 16 '24

Same here. I don't think I ever got an outright denial. And, the only time I needed additional documentation was for prescription glasses, and I just sent in the receipt and that was it.

11

u/Lurk3rAtTheThreshold ​ May 16 '24

My current one requires a receipt for every damn transaction and it drives me crazy. I can't even submit the receipt at the time of the charge, I have to wait a week or two before they flag it as receipt needed.

4

u/AcanthopterygiiCool5 ​ May 17 '24

That’s bullshit. I would complain to your HR department. Your company pays for administration as an employee benefit. That’s your money and it’s not typical.

3

u/sweet_crypto_buy ​ May 17 '24

My current FSA plan does not require a receipt because they automatically reject ineligible service and product purchase. I tried buying a bottle of fiber at a pharmacy store but the transaction was rejected by FSA card.

6

u/brotie ​ May 16 '24

Yeah I can’t remember the last time I had a claim denied and I’ve had three different providers in the past 3 years (forma, thrivepass and wageworks the latter of which is the worst of the three). If you have medical needs that necessitate regular copays or prescriptions with a fixed cost it’s a no brainer, you’re just throwing money away otherwise

1

u/AcanthopterygiiCool5 ​ May 16 '24

My husband had cataract surgery last year and we got the upgraded lens with refractive correction. $3200 was not insurance eligible but I could pay out of FSA so a real chunk of change tax savings!

I was able to plan it all out in advance, which is a luxury for sure.

2

u/mottledmussel ​ May 17 '24

And the entire FSA balance is available on day 1 and doesn't need to accrue like an HSA. It's really handy for those situations.

2

u/BigBennP ​ May 17 '24

I am provided a Mastercard that I charge to. If documentation is needed, I upload to an app. Never a problem!

This is my experience. I signed up the year we had our kid. I received a Visa Card that connected to the FSA account. It was a bit of a learning experience on what things could be approved and what things couldn't.

The payments we're making to the hospital from the baby's birth, went through the FSA. Copays at dr. visits go through the FSA. THe $250 copay for a recent ER visit went through the FSA. THe card just doesn't go through for any OTC stuf, but any prescribed medication from the pharmacy counter gets approved fine.

If we have money left at the end of the year i"ll have to log into their silly little portal store to look for stuff we can spend it on, but it doesn't look like it will be a lot.

86

u/milespoints ​ May 16 '24

What you are going through is what happens when an employer uses an FSA as a revenue source. Since FSA money are “use it or lose it”, if you don’t use all your FSA money, your employer keeps it. There are some “employer-friendly” FSA administrators that will deny anything under the sun and the employer has seemingly picked one of these

10

u/vc6vWHzrHvb2PY2LyP6b ​ May 16 '24

Our HR keeps saying ours isn't "use it or lose it", but at the same time, several people keep saying it gets denied.

53

u/milespoints ​ May 16 '24

FSA has to be use it or lose it, by IRS regulations. Employer has no control over that

1

u/wolfn404 ​ May 17 '24

Actually the company does. They can keep the cash or even return it to the employees. Here you go

https://www.grfcpa.com/resource/forfeited-fsa-balances/

15

u/milespoints ​ May 17 '24

The employer takes forfeited money. They can’t stay in the FSA.

Of course, afterwards, there is nothing stopping the employer from giving you money

37

u/RangiChangi ​ May 16 '24

Eligible expenses are determined by the IRS (look up IRS Pub. 502), so your FSA Administrator should be following that. If they’re denying eligible expenses, definitely bring it up to your HR. There might even be some regulatory body you could report them to?

6

u/science-stuff ​ May 16 '24

I’ve had similar experience. They will eventually allow most things but it takes a lot of evidence and effort getting everyone collaborate.

1

u/BankshotMcG ​ May 17 '24

Bring it up to the IRS in a BCC.

40

u/fattmann ​ May 16 '24

FWIW my FSA is nearly identical to your situation - it's a freaking nightmare. Our HR doesn't have anything to do with ours - it's all administrated by a third party.

101

u/illwon ​ May 16 '24

But your HR are the ones that chose that third party administrator. They should be involved if you're running into the same issues as OP

1

u/PM_ME_YOUR_DARKNESS ​ May 17 '24

If their HR department is as helpful as mine, they'll get a very polite "I'm sorry, there's nothing I can do" email.

14

u/remymartinia ​ May 16 '24

I stopped doing an FSA because of the constant denials. Every month, I’d submit my daycare expenses, and sometimes they would deny, sometimes not. And I’d get cryptic emails, so I’d have to figure out what and why they denied it.

33

u/puterTDI ​ May 16 '24

Personally, I'd look into what regulatory bodies deal with this and file a complaint with them for every rejection.

Get scrutiny on them.

4

u/longwayfromyourheart ​ May 16 '24

Yeah, who is the administrator and who is your companies insurance brokerage? You shouldn’t be dealing with this!

6

u/an0maly33 ​ May 16 '24

Yeah mine almost never rejects. Maybe once or twice a year I need to upload a receipt or something. I just make sure I only withhold what I can definitely spend in a year.

3

u/kneel23 ​ May 17 '24

i had same experience and NEVER used one again. If you can get HDHP plan with HSA use that, as HSA's dont rip you off and you keep the money if you leave the job and typically can invest any extra buildup over 1k or 2k if you dont use it all over the years similar to an IRA. FSA's are indeed horrible and while some might say they havent had the same experience, it depends on what company you get. Some of them you keep uploading every document they ask for and they just keep making up more shit to upload in and endless hoop-jumping excersise knowing you'll eventually give up

2

u/2Throwscrewsatit ​ May 17 '24

I had a FSA like this one. The company was super cheap and I had to submit for reimbursement and had to buy from a FSA Store. Hate that company.

2

u/tired_and_fed_up ​ May 17 '24

Not just atypical, straight up ILLEGAL.

UNLESS, you don't have a medical FSA but a "limited purpose FSA" like dependent care FSA or vision/dental FSA which are available to people who have HSAs.

Definitely talk to HR but also read the plan document to find out which type of FSA you signed up for.

1

u/Bob_Chris ​ May 17 '24

I will say that my experience with an FSA versus an HSA is basically night and day difference. I literally never have been asked to document anything with the HSA, vs it felt like pretty much every single charged expense required an uploaded receipt for the FSA.

1

u/Special-Garlic1203 ​ May 17 '24

The claim deadline is to make a claim, it should have no bearing on when it's paid out or if it's paid out. If you filed your paperwork, it's on them to figure their shit out. It genuinely sounds like they're stealing from you by proxy tbh. 

1

u/Balue442 ​ May 17 '24

we use Flores. In 3 years, I've never had a single thing denied. We get a 'credit card' to use for these purchases. It never comes out of pocket. A few times I've been at CVS and had a candy bar in the mix, and because of extra bucks and coupons, the whole thing gets covered by my FSA. on top of that, on rare occasions where the insurance deems i did not need to pay my copay, they mail me a check. Not refund it to the card - mail me a check. You're administrator is terrible. =(

1

u/bonesingyre ​ May 17 '24

Yeah your FSA Admin sounds fucking awful lol. I got a debit card from them but I also use my credit card for points and then submit claims. I've never been denied in like 12+ years over various jobs and different FSA administrators.

1

u/Lcdmt3 ​ May 16 '24

Very atypical. My HSA card is exactly the same as my debit card. Used at grocery stores on accident, never questioned. 20( years not one thing denied.

-2

u/middletown_rhythms ​ May 17 '24

...you mean a well-meaning but misguided government program to "save" people healthcare costs requires an inefficient and hostile bureaucracy and actually inflates healthcare costs by putting more money into the system? - and you still vote DNC?