Each year I put some money into my FSA which will allow me to pay for prescriptions (and other medical costs) tax free. The problem is, you lose any amount not used by the end of the year (or shortly thereafter). Now some places for some reason will let you carry some of it over.
I am wondering, what happens to all the money you don't use? Does the government just take it from you? As an aside, why do some places let you carry some over and some not? I thought it was a federal rule.
So I am wondering, what happens to all the money you don't use?
They go back to your employer, which can use it to decrease administrative costs in future years, increase coverage, or refund it to employees (through a refund would be a taxable event). I believe they have to use the same option for all employees, so you can't, say, request a refund if your employer chooses to use it to decrease costs.
As an aside, why do some places let you carry some over and some not?
FSA providers now have two options: a 2.5 month "grace period" or a $500 rollover option. Depending on which option your FSA allows, you can either roll over $500 from one year to the next, or you can claim expenses incurred through March 15th of the next year.
It appears you are talking about FSAs (Flexible Spending Accounts), rather than HSAs (Health Savings Accounts). An HSA has none of the restrictions you mention.
So I am wondering, what happens to all the money you don't use? Does the government just take it from you?
The employer gets back whatever money you do not use. They often use this money to:
why do some places let you carry some over and some not? I thought it was a federal rule.
It is a federal rule, but the employer can choose:
The employer can do neither or one of these options, not both.
