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How are the unused funds in flexible spending accounts absorbed by the service provider?
I place pretax dollars into a medical flexible spending account. I have been told that the balance is "use it or lose it". Though I don't anticipate a problem, I am curious. How much is actually lost on a yearly basis, and how is it handled by the service provider? Is there ant oversight into this particular aspect of this service?
2 Answers
- A HunchLv 71 decade agoFavorite Answer
The service provider is typically paid a flat fee based on number of employees.
The reason this is use it or lose it, is because you can use it before you have paid into. What you allocated for the year, is available to you on Jan 1, even though it will take the entire year for you to pay into the program. Thus, if you terminated (voluntary or involuntary) before the end of the year, you get to keep the money. To alleviate the risk to the employer, the law provides the employer to keep any unused portion. If the program didn't have this provision, it is unlikely very many companies would adopt the benefit.
I don't have specific statistics about how much is abondoned at the end of the year or how much employers lose due to terminations.
In every instance I have worked with there is an annual accounting of the monies.
Source(s): HR consultant - STEVEN FLv 71 decade ago
They are NOT absorbed by the service provider. They are CONFISCATED by the Federal government. No there is no oversight over how the Federal government wastes money.
