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***UPDATE: Here's my options ...*** HSA and FSA in the same year - penalty?! Login/Join 
Stop Talking, Start Doing
posted
*** I just posted the email that HR sent me today with my options further down this page .. what would YOU do? ***


I was just informed by HR that, since last year, I’ve had both a HSA and an FSA and that’s not allowed by the IRS.

Apparently if you contribute to an HSA then the only FSA you can have is the “Limited FSA” with only allows for dental and vision payments, nothing medical.

Well, somehow I signed up for the HSA and FSA that allows medical expenses and that’s double dipping and not allowed.

So I spent $1,000 last year on medical expenses in my FSA and my employer is now sayin I need to pay that $1,000 back to them.

I said WTF?!?!? A $1,000 penalty for doing absolutely nothing?!!?!

They also retroactively changed my FSA last year to now be the Limited FSA variety, same as this years FSA too.

Am I screwed here or what? This is pissing me off. I really don’t want to hand them $1,000 for doing nothing.

They said they aren’t sure how our enrollment system even let me pick this two options together, as they aren’t allowed.

This message has been edited. Last edited by: Copefree,


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Mind. Over. Matter.
 
Posts: 5070 | Location: The (R)ight side of Washington State | Registered: August 31, 2011Reply With QuoteReport This Post
Be not wise in
thine own eyes
Picture of kimber1911
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I would think the penalty would be imposed by the IRS.

Either way you will be paying a penalty.

Quick Google tells me I am wrong and it is you Employer who will hold you accountable.

FSA
“If double dipping goes by unnoticed by the administrator, the whole plan could be considered non-compliant and everyone in your company could lose the benefit.

Even worse, if the FSA plan was found to be out of compliance, all those tax-free benefits could instantly become taxable to employees. And we wouldn't want to be the person responsible for that mistake.”



“We’re in a situation where we have put together, and you guys did it for our administration…President Obama’s administration before this. We have put together, I think, the most extensive and inclusive voter fraud organization in the history of American politics,”
Pres. Select, Joe Biden

“Let’s go, Brandon” Kelli Stavast, 2 Oct. 2021
 
Posts: 5267 | Location: USA | Registered: December 05, 2004Reply With QuoteReport This Post
Character, above all else
Picture of Tailhook 84
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It's worth pursuing how the system they use for employees to make their selections even allowed this to happen. (This statement assumes you log into a website to make your selections.) And how that the mistake wasn't caught by the benefits specialist(s) before being submitted for the plan year is also a question that should be asked.

Do you still have the benefits selection packet describing your benefits for the plan year? If so, does it specifically state that you are not allowed to select both?




"The Truth, when first uttered, is always considered heresy."
 
Posts: 2540 | Location: West of Fort Worth | Registered: March 05, 2008Reply With QuoteReport This Post
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Picture of sourdough44
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A few years back I moved to an HSA, seems less reasons to be in a FSA anymore. That’s my understanding anyway.
 
Posts: 6132 | Location: WI | Registered: February 29, 2012Reply With QuoteReport This Post
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quote:
Even worse, if the FSA plan was found to be out of compliance, all those tax-free benefits could instantly become taxable to employees. And we wouldn't want to be the person responsible for that mistake.”

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
This. You do not want the IRS involved with this sort of stuff. I would get advice on this from an independent CPA who has experience with company plans and the mistakes they make. The IRS loves to get its hands on FREE money like this. To protect yourself make sure they can correct this mistake retroactively. This sort of mistake suggests incompetence on the part of HR.
 
Posts: 17177 | Location: Stuck at home | Registered: January 02, 2015Reply With QuoteReport This Post
Gone but Together Again.
Dad & Uncle
Picture of h2oys
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Apparently if you contribute to an HSA then the only FSA you can have is the “Limited FSA” with only allows for dental and vision payments, nothing medical. THIS IS CORRECT.

Well, somehow I signed up for the HSA and FSA that allows medical expenses and that’s double dipping and not allowed. WHY DIDN'T YOUR HR DEPT CATCH THIS.

So I spent $1,000 last year on medical expenses in my FSA and my employer is now sayin I need to pay that $1,000 back to them. WERE THE FSA FUNDS MONEY YOU PUT IN THE PLAN YOUR MONEY?


They also retroactively changed my FSA last year to now be the Limited FSA variety, same as this years FSA too.


They said they aren’t sure how our enrollment system even let me pick this two options together, as they aren’t allowed.[/QUOTE] SO PERHAPS THEY SHOULD EAT THE PROBLEM AND NOT YOU?
 
Posts: 3698 | Location: St. Louis, MO | Registered: November 24, 2009Reply With QuoteReport This Post
Stop Talking, Start Doing
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To answer the questions, I have no idea how HR missed this but that’ll be a question I ask them on Monday when we meet.

And yes, I paid in $1,000 last year into my FSA of my own money, through payroll deductions.

Now I “owe that money back”. Essentially meaning my $1,000 in medical bills last year is doubling.

Is it too far to ask the company to repay this for me?! They should slide me a $1,000 bonus or something to cover it.

What would you do if you woke up tomorrow and were told you owe your company $1,000 for doing absolute nothing — for someone else’s mistake?!?

Ridiculous.


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Mind. Over. Matter.
 
Posts: 5070 | Location: The (R)ight side of Washington State | Registered: August 31, 2011Reply With QuoteReport This Post
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It seems- You put $1000 tax free into an FSA by mistake and paid medical bills with it.

It would seem you owe the IRS taxes, social security etc and any fine if levied on the $1000.

If the $1000 was your own money and not matched etc- Why does the company want it back? If you gave it back and they processed the $1000 back to you as normal pay with taxes etc taken out then maybe.


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Posts: 13386 | Location: Bottom of Lake Washington | Registered: March 06, 2007Reply With QuoteReport This Post
Gone but Together Again.
Dad & Uncle
Picture of h2oys
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Since it was "your $1k and it was not taxed, one would think your employer could simply reduce your next check by the tax that should have been paid on the $1k, and you will "zero out".

I'm not a tax pro but could ask someone on Monday about this if no one else in our brain trust can weigh in.
 
Posts: 3698 | Location: St. Louis, MO | Registered: November 24, 2009Reply With QuoteReport This Post
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If you also have an HSA, wouldn't you just take the money from there to "pay back" the FSA. The HSA is for medical costs and that is what you have to pay back to the FSA. Assuming I am understanding this correctly.
 
Posts: 1049 | Location: Oklahoma | Registered: December 28, 2010Reply With QuoteReport This Post
Stop Talking, Start Doing
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Here's my options ... Mad. By the way, when they write that I had "ineligible medical expenses from 2018" that's only true as of about 3 days ago because they went in and retroactively changed my FSA last year from a 'Full FSA' to the 'Limited FSA' variety that only allows dental and vision expenses.

So, no, they were perfectly eligible last year, they just went in and made a change to make them look ineligible now.



quote:
In 2018 you were enrolled in a Health Savings Account in which you made contributions to and were also enrolled in the Full Health Care FSA. Since you made contributions into the HSA you were not allowed to use the funds in the Full Health Care FSA plan to pay for medical related expenses. The IRS constitutes this as "double dipping" and if audited you will be required to pay back the funds that were used for ineligible expenses as well as a penalty fee.

Your 2018 annual election in the Health Care FSA plan was $1000 and of that $912.71 was used for ineligible medical related expenses. The remaining $87.29 from 2018 was carried over to your 2019 Limited Purpose Health Care FSA plan. Here are the options you have to correct this issue:

Option 1 - Keep the 2019 Limited FSA plan, correct the 2018 ineligible expenses and keep the 2019 HSA
Pay Navia back the $912.71 that was used for ineligible expenses. When you pay that back, $412.71 can be carried over to your 2019 year making your total carryover amount $500. The remaining $500 in the Limited FSA from 2018 would be forfeited.

Option 2 - Correct the 2018 ineligible expenses and change the 2019 Limited FSA to Full HCFSA with no HSA contributions during 2019
Pay Navia back the $912.71 that was used for ineligible expenses. When you pay that back, $412.71 can be carried over to your 2019 year making your total carryover amount $500. The remaining $500 in the Limited FSA from 2018 would be forfeited.
Request refund of $525 from your 2019 Personal HSA , those funds will then be paid out to you as taxable income.
Change the Limited Purpose FSA to a Full Health Care FSA for 2019. The account will have a $500 carryover from 2018. Payroll deductions this year so far are $291.69 bringing account total to $791.69. The maximum contribution limit for 2019 is $2700. We would need to know what annual amount you would like for 2019 if you decide this route, reminder that only $500 of unused funds can be carried over to the next year.

Option 3 - Do nothing to correct the 2018 issue and take a chance at being audited by the IRS.
For 2019, you will continue making contributions to your HSA (those funds are to be used for eligible medical expenses).
For 2019, you will stay enrolled in the Limited Purpose FSA (those funds are to be used for eligible dental, vision and over the counter non-medical related eligible expenses).

Please let us know by EOD tomorrow 04/23 which option you would like.


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Mind. Over. Matter.
 
Posts: 5070 | Location: The (R)ight side of Washington State | Registered: August 31, 2011Reply With QuoteReport This Post
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How nice of them to give you lots of time to figure this out. I would ask to run this by a CPA of your choosing. I do not know the chances of an audit by the IRS. A good CPA will know that and help you make the best choice. It is a week past filing date so you should be able to get a quick opinion.
 
Posts: 17177 | Location: Stuck at home | Registered: January 02, 2015Reply With QuoteReport This Post
semi-reformed sailor
Picture of MikeinNC
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OP, Mrs mike is a senior HR person....she has read this whole thread and says two things...
A.) if in option 1, you had some glasses or the like that was spent on items in last year it will lower the amount of 912.71 and that will reduce the amount you would have to repay the business (for their screwup),

Or

B.) follow option 3.

She also said that if you pay it back, the business will have to tax that thousand and send you a new or amended W-2. And that will meany you will have to amend you taxes for last year-which may lead to an IRS audit/ or raise flags because of all the wonkiness...



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Posts: 11247 | Location: Temple, Texas! | Registered: October 07, 2006Reply With QuoteReport This Post
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thine own eyes
Picture of kimber1911
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I would go Option 1.

Then for 2020 I would stop doing the FSA use it or lose it plan and stick more money into the HSA.

If you have an investment plan option with the HSA that can be a good option to use for saving for retirement.

HSA’s with investment options can be a great tool as the money is not taxed going in, grows tax free, and not taxed upon withdrawal when used for healthcare expenses.

Restrictions for HSA withdrawal in retirement is not strictly limited for healthcare which makes it a good investment for retirement.



“We’re in a situation where we have put together, and you guys did it for our administration…President Obama’s administration before this. We have put together, I think, the most extensive and inclusive voter fraud organization in the history of American politics,”
Pres. Select, Joe Biden

“Let’s go, Brandon” Kelli Stavast, 2 Oct. 2021
 
Posts: 5267 | Location: USA | Registered: December 05, 2004Reply With QuoteReport This Post
Stop Talking, Start Doing
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Thanks everyone for the insight — super helpful (Mike please tell your wife thanks too). I’m just trying to weigh out the “pick your poison” options.


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Mind. Over. Matter.
 
Posts: 5070 | Location: The (R)ight side of Washington State | Registered: August 31, 2011Reply With QuoteReport This Post
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