I received the following question regarding flexible spending accounts (FSAs) from a reader the other day:
“My employer is asking me to sign a form to reimburse them for FSA funds distributed but not yet set aside (I’m leaving before the plan year ends). I have refused. Is there a regulation that states I do not have to repay them?”
I’ve written about this general topic several times in the past. In fact, twice in my life I’ve left a job having spent out my full FSA allotment by mid-year, and I walked away with the difference in my pocket. At first I felt like I was doing something wrong, but I later learned more about how FSAs works…
In case you’re not aware, FSAs are a use-it-or-lose-it proposition. In other words, that you lose your unspent funds at the end of the year. Well, guess who gets to keep that money? Your employer. So before you lose too much sleep over coming out on the ‘winning’ side of equation, keep in mind that your employer is likely offsetting those losses by pocketing a ton of money from underutilized FSAs. It’s far from a perfect system, but it is what it is.
Now, setting aside the issue of whether it’s right or wrong to keep the money…
Can an employer can legally compel an employee to give this money back?
I’m not sure, but I thought that one of you might happen to know.
Beyond the issues of legality and right vs. wrong, however, you also need to consider the value of that money relative to the value of your relationship with your former employer.
If your employer asks for this money back, is it worth burning bridges to keep those funds?
If either of my former employers had asked for the money back, I’m sure I would’ve given it to them. But they were dealing with tens of thousands of employees, and they just seemed to consider it the cost of doing business. In fact, had I decided to pay it back on my own, I wouldn’t have had a clue where to start (though I must admit I never asked).