I changed my jobs earlier this year. I had enrolled in health and dependent FSA through my previous employer for this year. I just found out that I had only three month grace period to file my claims. The money is now forfeited and is back into "employer's fund". I should have paid attention to the rules but somehow it feels wrong that the money I set aside for my benefits goes back to employers fund. Anybody else had such experience? Is there anything else that I can do? I wish my previous employer shared these details in my exit interview.
Noted! I should have checked. I hope this post atleast helps others.
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No. It's part of the IRS regulations. Your previous employer takes on the risk that you'll spend all your allocation and then quit before you have to pay it back, and in return, it gets to keep any forfeited funds. What actually happens is that the forfeited funds are used to offset costs and any excess after all of the costs are taken out is distributed to the remaining participants.
Just curious why would employer take risk here? The benefit amount is cut from my pay check and I can only claim the amount that I have available at that time frame. Right?
Yes. But the money in your FSA account is front loaded. Say you keep aside 100$ a month. Your FSA account on day 1 has 1200 in it