Forfeiting money

Employees needlessly lose spending funds at year end.

By Todd Shryock

Employees enrolled in flexible health-care spending accounts, on average, forfeit $136 in savings by not using the benefit by year end, according to a recent Hewitt Associates survey of 509 organizations. In 1996, forfeitures occurred among 91 percent of employers offering a health-care spending program.

Flexible health-care spending programs allow employees to save money, tax-deferred, for the paying of expenses not covered by employer health insurance plans, such as deductibles and co-payment amounts, prescriptions, and vision and dental care.

Spending accounts for dependent care allow employees to put away money for child care or other dependent-care expenses. According to the Hewitt survey, 85 percent of employers offer a health-care or dependent-care spending account. As mandated by tax laws, money saved in flexible spending accounts must be used by the end of the calendar year or be forfeited, as accounts cannot be rolled over.

Employees need to verify near year end whether they have money left and to cover as many expenses as possible.

Despite the risk of losing unused funds, flexible spending accounts are a good deal for employees, allowing them to avoid the tax burden. An employee who puts $600 in a health-care account saves roughly $200 in taxes.

The survey estimates that in 1997, on average, an employee participating in his or her employer’s flexible spending account program contributed $744 to a health-care account and $2,848 to a dependent-care account.