My Flexible Spending Account Sent Me a Debit Card
January 10, 2008 by TFBAs if I don’t have enough cards in my wallet, the vendor for my employer’s health care Flexible Spending Account (FSA) sent me a MasterCard debit card. I’m supposed to use it for items eligible for reimbursement from the FSA.
The pitch from the FSA vendor is that I won’t have to file reimbursement claims for items I charge to the debit card. But I’m still required to save every receipt. They can come back and challenge me for the eligibility of the purchase and I must then send them the receipt showing what exactly I bought with the card. Using the card is only going to complicate matters. Because the card is good only for FSA eligible expenses, if I buy a 12-pack of soda together with a prescription at a drug store, I must pay for the drugs with the FSA debit card and pay for the soda with cash or a different card. It’s also only accepted at stores which installed a special computer system which distinguishes FSA eligible items from non-eligible items. If I charge the co-pay for a doctor’s visit to the FSA debit card, and the insurance company later tells me I haven’t met the annual deductible yet, I still have to file a paper claim to the FSA but I also have to explain to them that the co-pay is already reimbursed but the deductible isn’t. What a mess.
I’m afraid this is just an attempt from the FSA vendor to capture the merchant fees from the purchase. The FSA debit card came with no PIN. All transactions must be processed as “credit.” If I use their card, I won’t receive the 5% rebate from drug stores or the 1.5% rebate from elsewhere on my own credit card. Thanks, but no thanks. I cut up the FSA debit card without even activating it.
Related post: Why Banks Push Debit Cards
I’m an FSA nut. Until I read your post, I thought FSA debit cards would be a time-saver’s dream. What a logistical nightmare. I think you totally did the right thing cutting them up.
My FSA provider provides electronic filing of claims AND direct deposit. It’s definitely the way to go. I’ve got a post about it on my blog.
My provider also requires me to send in receipts too. So there is no advantage in using the card.
I prefer to either use the Fidelity 529 card and receive cashback of 2% or the Chase Cash Plus that rebates me 5% when I shop at pharmacies.
Excellent thoughts on this subject. It seems everything we do in life is a constant fight to retain every nickel we can muster.
I don’t think the FSA company can/will come back and challenge your purchases. The IRS can/will, however. Then again maybe I’m wrong because the FSA has incentive to deny charges since they keep any money left over.
Also, FYI: I have an HSA card (different entity I know) and ran into the same scenario at the drug store. I was buying some kiddie cough medicine (covered) and toothpaste (not). The system automatically recognized what was covered and what wasn’t. I had to hand over another form of payment for the toothpaste.
Having had both an FSA (previous job) and HSA (now), I much prefer the HSA. The recordkeeping and documentation is less rigorous, access to your money is less restricted, the tax benefits are unbeatable, and there is no risk of losing your money for not spending it.
Ted,
This is what they said on the instructions which came with the FSA debit card:
“Remember to keep your receipts from every card transaction, because you may later be notified that you’re required to send receipts or other documentation. Failure to send receipts will have an impact on your ability to use your card.”
I’ve never used a FSA. Unless you have a fixed expense the time and hassle of using the account along with the possibility of losing the remaining money at the end of the year has always made it seem like a bad deal.
dsowa:
Lemme guess - you aren’t married and you don’t have kids. I once thought the same as you. As a father of two - I don’t have that luxury. It’s *not* a bad deal *if* you know what you are doing. I use quicken to track my medical expenses so i have a pretty good idea of what my expenses will be. Also - my provider gives a 3 month grace period.
I am not sure what an HSA account is, but I am grateful for my flex spending account because two of our five children have a prescription expense every month. It is comforting to know that we always have the money to get it instead of worrying. I know it sounds like poor planning and that could sometimes be part of it but with seven people in our family, it gets rough sometimes.
sbz - HSA is Health Savings Account. You can have it only if you have a high deductible health plan ($1,000+ for individual coverage; $2,000+ for family coverage). The way you are using your FSA is exactly what it’s intended. In addition to helping you budget, when you use a FSA to pay for prescription expenses you also save on taxes (federal, state, Social Security and Medicare).
FSA is a great tool to save money no doubt. I have used one for several years but just changed to a company that uses the debit card. It’s a nightmare. Not only are the issues you relate valid, but my FSA provider challenges doctor appointments or anything that is not on a pre-certified list. I have had to substantiate everything except prescriptions from Walmart. And they have now asked for paperwork for an $8 purchase to be sent twice! Whoever said the providers won’t challenge most things is wrong. The old system was difficult but this takes the cake. You need a full-time secretary to get your own money back!
summary of the issue. This “Benny” card is marketed by my comp[any’s HR team as the end all be all of cards. I only found out recently that I can only use it for prescriptions and not doctor’s office fees!