SIGforum.com Main Page The Lounge ***UPDATE: Here's my options ...*** HSA and FSA in the same year - penalty?!
Main Page The Lounge ***UPDATE: Here's my options ...*** HSA and FSA in the same year - penalty?!Go | New | Find | Notify | Tools | Reply | |
| Stop Talking, Start Doing |
*** 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, _______________ Mind. Over. Matter. | ||
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| Be not wise in thine own eyes  |
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 | |||
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Character, above all else |
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." | |||
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Member |
A few years back I moved to an HSA, seems less reasons to be in a FSA anymore. That’s my understanding anyway. | |||
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| Member |
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ 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. | |||
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| Gone but Together Again. Dad & Uncle  |
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? | |||
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| Stop Talking, Start Doing |
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. _______________ Mind. Over. Matter. | |||
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| Member |
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. ____________________________________________________ The butcher with the sharpest knife has the warmest heart. | |||
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| Gone but Together Again. Dad & Uncle |
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. | |||
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| Member |
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. | |||
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| Stop Talking, Start Doing |
Here's my options ...  . 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.
_______________ Mind. Over. Matter. | |||
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| Member |
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. | |||
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semi-reformed sailor |
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... "Violence, naked force, has settled more issues in history than has any other factor.” Robert A. Heinlein “You may beat me, but you will never win.” sigmonkey-2020 “A single round of buckshot to the torso almost always results in an immediate change of behavior.” Chris Baker | |||
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| Be not wise in thine own eyes |
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 | |||
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| Stop Talking, Start Doing |
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. _______________ Mind. Over. Matter. | |||
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SIGforum.com Main Page The Lounge ***UPDATE: Here's my options ...*** HSA and FSA in the same year - penalty?!
Main Page The Lounge ***UPDATE: Here's my options ...*** HSA and FSA in the same year - penalty?!© SIGforum 2024