You can put pretax money into a flexible spending account to pay for certain costs like health care or child care. In exchange for the ability to shelter that income from taxes, you have to use the funds in your FSA account for their designated purpose, and you have to use them before they expire.
What you may think of as your flexible spending account isn't really yours. You're putting your own money in, and you're able to withdraw from it whenever you want, but once you put the cash into the account, it ceases being yours. Your employer owns your FSA and owns the money inside it.
There are two ways the money in your FSA account can expire. Most FSA funds expire at the end of the year. The second is that your FSA goes away when you leave your job, just like many of your other benefits. If you leave cash in your FSA when you quit, your employer will eventually get to keep it. The money you forfeit typically goes toward maintaining the company plan.
Buying Extra Time
One way to protect yourself is to spend your FSA money before you quit your job. If you've already bought glasses, stocked up on prescriptions or had your yearly lab tests, there probably won't be anything left. If you don't do this, you still have a few options. Your company's FSA may have a grace period that gives you until the end of the month to use your money, for example. Alternately, you may be able to extend your FSA benefit under COBRA, the same federal law that lets you extend your health insurance.
If you see yourself switching jobs, consider funding a health savings account instead. HSAs work in conjunction with high-deductible health plans and also let you use pretax dollars to pay out-of-pocket health expenses. They have two big differences. An HSA is yours, so you can take it with you regardless of where you work. An HSA also doesn't expire, so you can let the funds roll over. The one drawback is that you can't use your HSA for dependent-care expenses -- it's only for health care.
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