If you elect to have a Flexible Spending Account (FSA) with your employer and don’t spend all the money in the year, the remaining balance is forfeited. That can be a real bite in the butt. That’s why it is important to plan your medical expenses carefully.  FSA plans allow you to lower your taxable income by claiming medical expenses and allows you to pay that amount throughout the year instead of a lump sum payment. For those of you with kids, this is definitely a great plan.

But, did you know that if you if you spend all your FSA money and get fired/laid off from your employer, you do not have to pay the difference? For example, let’s say you set up a FSA account for $2000 dollars for the year 2009. That equals to $167 a month out of your paycheck throughout the year. Now, in February you had LASIK surgery on your eyes for $2000, essentially spending all the money in your Flexible Spending Account. Then on March 1 you get the bad news your employer is letting you go. So far, you’ve only paid $400 of that $2000 FSA. Guess what? That’s $1400 free money! You are not responsible for having to pay that money back.

If you are contributing to a Flexible Spending Account (FSA) and are worried about losing your job, get out there and spend that account money now. Don’t put off a surgery or getting presciption glasses any longer. Take advantage of a system that takes advantage of you (if you don’t spend). If you were just laid off, you usually have 30 days (sometimes up to 45) to make insurance claims. The bad news is that after you’ve been let go, you can only benefit up to the limit of what you’ve paid into the FSA.