FSA Loophole

Oh hey there. I see I’ve caught you admiring my picture there. Yes. I played a mini game of chicken with my credit card company and came out on top.

cc fee referal

 

Anyway, last Tuesday was an awesome day for me. I got LASIK and a new job offer on the same day. While I’m super excited about this new perfect vision and career opportunity, I am equally as excited about a third thing: I was put into the perfect situation to test a long time theory I’ve had.

I’ve always wondered (but never researched) what happens to your FSA if you leave a company. Basically, once you leave the company, you lose your FSA. Also, since you’re no longer employed, they can’t fund it anymore from your paycheck. This means that if you spent all of your FSA money for this year, you don’t need to pay the difference back once you leave the company.  

Ok, so let’s back up a bit for those who aren’t sure what an FSA is. An FSA is a Flexible Spending Account. Before every calendar year, you can announce how much money you wish to put into this account. This amount of money can be spent on healthcare related expenses throughout the entire calendar year. The benefit is that this money will be tax free. The tax free money is automatically withdrawn from each paycheck. So for example, if you elected to put $120 in your FSA in 2016, then every month you will get $10 taken out of your paycheck. This $10 will not be taxed and you can spend $120 untaxed dollars on healthcare related expenses at any time in 2016. Usually you will either get reimbursed, or they’ll give you some sort of debit card that can withdraw directly from the account. So, it is possible to spend all $120 in January, even though only $10 has been taken from your paycheck so far. The downside to an FSA is that if you don’t spend the $120 within the calendar year, then you lose it.

But what if you spend the $120 and then leave the company? It’s not like they can take money out of your paycheck if you don’t have any more paychecks coming. The answer is that you basically get this money for free. Your company is not allowed to ask you for this money back. They are basically made whole by the suckers who forget to spend their FSA.

In my case, I funded my FSA this year for ~$2,500. I am working at the company through March, which means by then they will have taken about $600 from my paychecks to fund my FSA. This means that when I get reimbursed for my LASIK operation, I am going to get ~$1,900 for free.

Crazy right? This will probably never be enough of a reason to quit your job, but you can save a significant amount of money if you time it correctly. Keep this in mind the next time you are planning any healthcare related expenses.

Also, LASIK is pretty cool and I highly recommend it, although I know very little about LASIK for someone who just got it. I basically found my place by typing “LASIK near me” into Google and just chose the place across the street. I went in for a consultation and got the operation two weeks later.

The operation lasted only 5 minutes and they told me I had 20/15 vision the next day. 20/15, by the way has got to be the least technical way to measure something. It literally means, you can see something from 20 feet away, when someone with normal vision can see it from 15 feet away. Although the operation is short, it is definitely not enjoyable. The side effects I’ve been experiencing so far is very dry eyes and an uncontrollable urge to brag about my perfect vision to Beatrice every chance I get.

As for the price, they tried to charge $5,200 for the operation, which I negotiated down to $4,500. Subtracting the $2,500 FSA reimbursement and adding the $600 of pre-tax dollars I’ve already contributed, my total comes out to around $2,400 in after tax dollars. I also signed up for the American Express SPG card and got 35,000 SPG points with that purchase. Pretty sweet deal.

(P.S. I also thought about funding the other $2000 to my FSA at the new company, but you can only reimburse things purchased from the date you set it and forward)

(P.S.S. Referral Link for Amex Card if you want to get it too. Here’s what you can do 35k SPG points) Offer ends 3/30

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