Wednesday, February 15, 2017

Rockstar Finance Directory

Real life is sucking up all my time lately, so just a short post this week.

Check out the Rockstar Finance Directory by J. Money. It's a list of most of the active financial bloggers in the personal finance community. He's also incorporated his Blogger Net Worth data into it as well. As usual, he's done a great job rounding up the interesting blogs from around the internet!

Lots of big changes coming up in my life, so posts may be sporadic for a bit. I will return, however!

Wednesday, February 8, 2017

Don't Leave Money On The Table: Changing Jobs With A Medical FSA = Free Money

Medical flexible spending accounts (FSAs) offer you a way to pay for certain medical expenses using pre-tax dollars. At the beginning of the year, you tell your employer how much money to put into this account for the year and, each paycheck, a portion of your pay is diverted into the account. The amount is divided equally over the course of the year. You get that money back by submitting receipts for covered medical expenses to the plan administrator, who then disburses the money from the account to you.

These accounts are use-it-or-lose-it accounts, meaning if you don't submit enough qualifying expenses during the year to use all your money, you lose whatever is left. (Recent changes allow your employer to offer you the opportunity to roll some funds over into the following year, but this is something your employer has to opt-in to, so check your plan details to see if this option is available to you.)

The IRS states these plans have to operate under Uniform Coverage Rules (PDF) for cafeteria plans. This means the entire amount of your yearly contribution must be made available immediately at the start of the year.

So if you elect to contribute $2,500 for the year, you can submit a qualifying medical claim for $2,500 in January and get the entire amount paid to you, even though you have not yet contributed that amount to the plan. (Remember, your contribution is spread out over all your paychecks for the year. So if you get paid twice a month, or 24 times a year, each paycheck you deposit $104.17 to the account.)

As I mentioned before, this is a use-it-or-lose-it account. If it gets to be December 31 and you have not spent $2,500 in qualifying medical claims throughout the year, you lose whatever excess funds are in the account. But...

What happens if you change jobs during the year?

Free Money Happens!

Because the plan must operate under Uniform Coverage Rules, employees have a way to get some free money though a loophole.

Suppose you elect to contribute $2,500 to your FSA account. In January, you go crazy and go to a bunch of doctors and buy all kinds of covered items. You manage to incur $2,500 in medical costs during the month. You submit the receipts and the plan pays you $2,500. On February 1, you change jobs.

Because you were only at your old job for one month, you only contributed 1/12 of $2,500 to the account. But they already paid you the full $2,500. Here's the loophole:

Your employer cannot recoup that money from you.

You just got $2,292 in free medical care! (That's $2,500 minus the 1/12 of $2,500 you paid in January.) This is the positive flip side of the use-it-or-lose it nature of the plan.

To make the deal sweeter, when you start at your new employer, you can start another medical FSA for the maximum amount and continue to submit expenses against that.

The Fine Print

There is one rule you need to be careful of: expenses have to be incurred while you are still covered under your old plan. So, in our example, if you quit your job on January 31st, the plan will only pay for medical costs incurred on January 31 or earlier. Depending on the plan, you may also have to submit receipts for reimbursement prior to your final day of employment.

This just takes a little planning. If you know you will be changing jobs, go on a spending spree to use up the full amount you elected to put away in your FSA. It can be hard to use up the extra funds solely from visits to the doctor (most elective surgeries do not qualify for reimbursement). However, look at the list of over the counter products that DO qualify:

  • Bandages
  • Blood pressure monitors
  • Cough medicine
  • Crutches
  • Alcohol swabs
  • Condoms
  • Eyeglasses
  • Non-cosmetic dental work
  • Saline nose sprays
  • First Aid kits
  • Reading glasses
  • Sunscreen
  • Lip balm with sunscreen

Those are just a few. A more detailed list can be found here. Your FSA plan administrator probably also has a list of all covered items. Most drug stores with pharmacies note on the receipt which purchases are eligible for FSA reimbursement.

So if you are planning on changing jobs, go a medical spending spree and use up all of your FSA funds, even those that haven't been deducted from your paycheck yet. And don't leave money on the table!

Wednesday, February 1, 2017

Goal Update: End Of January 2017

At the end of each month, I post an update of my goals, including a brief discussion of any notable events that might have occurred during the month. The latest month's figures can always be found under the Featured menu in the menu bar at the top of the blog.

Last updated: End of January, 2017
Current value: $29,287
Change from last month: +$703
Percent of Goal:  26.93%

Note that the funds in this account are invested in stock, so there will be fluctuations in value that are outside my control. I never withdraw money from this account, so any dips are purely due to stock price changes.

Events Of Note Last Month:

I received income from several different sources this month. Net income from my online courses was $217.25. My hard money loan generated $133.33 in income. I made $3.89 in eBook royalties and I received $14.48 from a class action settlement with

Not much of note went on this month. We just keep on tucking away money in our various savings accounts. My wife and I are driving out to Las Vegas in February, so I'm looking forward to that. Also, my hard money loan is coming due and I'll look to roll that into a new one and add some funds to it at the same time.

Net Worth Update

For January, our net worth rose by $12,803. The gains came from a rising stock market and property values. No change in the Loans figure, which looks strange, but this was because I paid our January mortgage bill in December to get the extra month of interest to deduct on my 2016 taxes.

We reached our goal of saving $10,000 in an emergency fund. Rather than stop saving, we're just going to continue to put aside the same amount each week and keep growing it. We may decide to use the excess for something in the future. Besides, it never hurts to have some extra savings laying around!

December 2016January 2017
Note: categorizes our HELOC as a credit card debt, not a loan, hence the apparently high credit card balance.

If you have any questions or suggestions for topics, please drop me a line in the comments section!