Don't Lose Out on Contributions to Your Flexible Spending Account

You probably already know that you will lose any money left in flexible spending accounts that you don't use by the end of the benefit year. But you may not know this: You could still forfeit money you've contributed if you quit or lose your job before you've incurred enough allowable expenses to deplete your account.

Flexible spending accounts, which allow employees to have money deducted from their paycheck to reimburse them for dependent care expenses and medical expenses that are not covered by insurance on a pretax basis, can be a wonderful benefit. But if you leave a balance in your flexible spending account when you leave your job-voluntarily or otherwise-you are, unfortunately, out of luck.

There is one exception to this rule, however. If you elect to continue your medical coverage under COBRA, the Consolidated Omnibus Budget Reconciliation Act, you will continue to be eligible for reimbursement of allowable healthcare expenses from your medical flexible spending account as long as you remain covered under COBRA. Unfortunately, there is no such loophole for dependent care flexible spending accounts.

What happens to the money when you lose it? That's up to the company.

The moral of the story: Don't leave any money in your flexible spending accounts. Make sure the funds leave long before you do.

You don't have to wait until you pay an allowable medical expense before you request reimbursement for it. That's right! You can withdraw the money before you've actually paid the bill! So submit the necessary documentation for reimbursement as soon as you receive it. Don't wait until you've received a "paid in full" receipt. As far as dependent care expenses are concerned, submit them as soon as you incur them. Remember, you can't lose by requesting reimbursement promptly, but you can lose BIG by waiting until the last minute to incur reimbursable expenses.

You can avoid this by promptly submitting paperwork and receipts for eligible medical expenses to your flexible spending provider as soon as you incur them. I highly recommend submitting them via fax and verifying receipt over the telephone.

Estimate how much you'll be eligible to be reimbursed for through flexible spending carefully before you make your benefit elections during open enrollment. Make sure you request reimbursements for allowable expenses quickly and follow up on them until you receive them, and you won't end up a sore loser.