Flex Spending: Worth the Cost?

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Is this article for employees/users of such a benefit, or is it a commentary directed at lawmakers? I am confused. And, not much more educated than before I read the article. Q. If both parents work at jobs that "both" offer flex-spending for daycare, can both elect the option and double the $5k to $10K in tax-free costs??? That would be a better direction of artticles like thisone that is only a "vent" for some liberal writer.

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sdadfgg of NY 10:10PM September 23, 2010

are a little like mail-in store rebates. Something that can be touted as a big deal when it is the SUBSTITUTE for what could have been and should have been merely lower prices up front, something that often requires a third-party administrator (sucking off some of the gravy), and something that half the folks never quite navigate in the details---leaving the money behind with the employer or other corporate players. Why do you suppose lobbyists got Congress to write it that way?

Muser of NM 2:12PM September 18, 2010

FSA benefits need to be rebranded. The money I put in an FSA is a loan to myself earning an interest rate that is equal to my tax bracket. Beat that guaranteed return on investment! A 29% ROI ought to be worth a few hours of work over the course of the year.

MSB of PA 8:38PM September 17, 2010

Thank you for these great comments... I thought I would respond to some of your points:
1) It's true that some flex spending systems are easier to use than others. If yours doesn't involve paper or much time, then that's great, and addresses many of my problems with how flex spending works. I hope everyone can have an easy system like that. I certainly don't.
2) I am not telling people to "be lazy and waste money," but sometimes the time involves does not justify the savings. For example, if someone can afford it, they should pay someone else to clean their home, because then they can spend their time on other things, such as earning more money.
3) To Ben of Ga, who critiqued the flat refund idea: You make an excellent point. Still, refunding based on taxes paid benefits higher income folks more; that is a fact, and I'm not the only one to have brought it up.
Thanks to everyone for contributing to the discussion.

Kimberly Palmer of DC 10:25AM September 17, 2010

My employer offers an FSA and it couldn't be easier. When you sign up for the account, you have the ability to log into a website, provide your checking account info and anytime a health or dental claim gets processed, the FSA claim gets done automatically and within 2 days the money is direct deposited into my checking account. This isn't rocket science. If your company offers and FSA and it isn't this easy, talk to HR about going through a different benefit provider who does offer this service. They are out there...it's just the choice of your company not to use a provider who can handle things electronically. Passing up these tax savings is just plain silly. Why would you ever advise anyone to not make the effort to save hundreds of dollars each year? As a financial advisor, you should be ashamed of this advice. "Be lazy and waste money"...hell of a marketing slogan.

Bryan of CA 5:18PM September 16, 2010

Sorry to disagree. Yes, there can be some paperwork and yes, some valid expenses do get kicked back. But for a family of four, the benefits far outweigh the problems. We too have a debit card, so generally speaking we simply swipe the card at the register or in a doctor's office (or optometrist, or physical therapist, dentist, orthodontist....) and away we go.
The system also allows consumers to spend up to the full value of their plan before the deductions are taken from paychecks. Meaning that a family that commits $2400 per year can spend all $2400 in January even if they will only have $100 deducted each pay period. (At least this is how each plan we have used has operated) This also means that anyone who is laid off or quits their job can actually get more benefit than they pay for IF they plan accordingly.

JK of CA 3:29PM September 16, 2010

The benefit is not, nor was it intended to be, a refund. It's a tax break; you get to keep the money you would *otherwise pay* in taxes on the eligible amount. That's nowhere close to the same thing as a refund. People in lower tax brackets already get the huge benefit of not paying as much (or any) taxes on the *full amount* of their earnings, including whatever they might spend on health care. And you want to just give lesser earners a refund? There is a difference, you know, between not having to surrender money you already have and receiving money you never had at all.

Ben of GA 12:35PM September 16, 2010

Don't worry, Obamacare will greatly restrict this benefit anyway to the point where it won't make sense to bother with it. The paperwork isn't all that bad, my plan also gives me an "ATM" card to use so I don't have to lay out any money. What needs to change/increase is the Dependant Care Flexable Spending which currently caps out at $5k or about 6 months of expense for 1 kid. As far as use it or loose it goes, the feds extended the time for you to use your money until March 31st of the following year. Obamacare will eliminate over the counter drugs and other medical items such as band-aids from the program and that's the stuff you stock up on when you have excess money in your account. Don't know what we'll spend the extra money on now. Thanks OBumma!

Billy of NY 11:52AM September 16, 2010