Managing A Flexible Spending Account

Help! What's the most effective way to create and manage an account for a flexible spending account? Should it be a 'tracking' account or a 'budget' account? I currently submit eligible expenses for reimbursement and have set my FSA account set up as a tracking account. I'm thinking it should be a budget account so the funds, which are available in full at the beginning of the plan year, can be allocated to a category. In my checking account, from which all medical-related items are paid to the provider, I have medical budget categories for 'reimbursed' and 'non-reimbursed', but they aren't currently budget funded. When I enter a transaction in checking, I use the corresponding reimbursement category, but until I submit the expense the category appears underfunded. I need my checking account to balance, so need to enter transactions accurately there. Should I be entering a 'transfer' transaction from the FSA account to checking when I submit a reimbursement request? is there some other nifty way to handle this? I'm sure there are multiple ways of handling the situation. Any and all thoughts are welcome.

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  • YNAB Help document on reimbursements

    My personal preference for dealing with all reimbursable expenses is to use an off-budget tracking account and to prefund the budget category I use for the expenditures. I pay the full cost of the expense with my own money, then I use tracking accounts for reimbursable health claims I make against insurance and a health spending account. When the funds come in, I record a transfer from tracking account back to an on-budget account (usually chequing), and I categorize the incoming funds directly back to the category I spent from (usually medical/dental) rather than categorizing the incoming as Inflow: To Be Budgeted.

    Not everyone is financially able to pay for expenses with their own money.  Last year, for example, I used a credit card for a rather large medical expense, and waited for the insurance claim reimbursement to repay the credit card.  Both types of scenarios are described in the YNAB help document.

     

    Edited to add:  My HSA is managed by a third party and I can only access the funds by making a claim, so keeping it off-budget makes the most sense for me.  If your FSA is something you can spend from directly, then it may very well make perfect sense to have it as an on-budget account.

    Reply Like 1
      • Blue Deer
      • YNAB Lover
      • Cornflower_Blue_Memory.4
      • 1 yr ago
      • Reported - view

      HappyDance Thank you!!!

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  • Hi Blue Deer !

    I know you mentioned paying the medical expenses from your Checking account, but how are you reimbursed? If you pay for the expenses upfront and then money is transferred from the FSA to your Checking account as a reimbursement, then I think it would be best to leave that account off budget. Even though those funds are there, you cover that spending with your money upfront and then receive funds to cover it - as talked about in the article HappyDance shared.

    If you can access that account upfront (meaning you don't have to cover those expenses with your own funds initially), then I would suggest including it as a Budget account. If you have access to those funds starting at the beginning of the year, then you can use them to budget towards the Medical expenses in your budget. 

    I hope the Help Doc is helpful, but let me know if you still have questions!

    PS. I went ahead and moved this from the Community Challenges section to the Q&A section to hopefully have others weigh-in. :)

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      • Blue Deer
      • YNAB Lover
      • Cornflower_Blue_Memory.4
      • 1 yr ago
      • Reported - view

      Faness  Thank you! Great info!!

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  • I actually use two different methods for my two FSAs.  For my healthcare FSA, I have an on-budget account.  On Jan 1 that account has an inflow for the total FSA election amount, which I categorize as Inflow:TBB.  I then immediately budget it to the medical category.  All medical expenses are categorized as medical, and flagged purple and get a "Do FSA" memo.  When the reimbursement happens, it's an on-budget transfer.  It works pretty well.

    For my Dependent Care FSA, I budget for the category with regular income so there is enough to pay bills when they arrive, and then submit receipts/claim forms to the FSA administrator.  When the money comes in, usually once a month, I categorize it as Inflow:TBB and budget it with all my paycheck income when I do my budgeting at the beginning of each month.

    Reply Like 1
  • When I had an FSA, I never kept track of it in YNAB (It just didn't make sense to me to track it there since it would just have to be closed or zeroed out at year end).  I typically just used the FSA debit card for those expenses.

    When I didn't use the debit card and paid out of my checking: I had two medical accounts - One that is for qualified reimbursement and one for the things that didn't qualify. When I received the money, I just put it directly into the Qualified Medical category and let it zero out on it's own. (avoiding the TBB all together) i.e. Payee: (name of FSA handling company), Category: Medical(FSA Qualified), Inflow: Amount

    I still use this method for my HSA, except that since I don't lose the money at year end (and I can use it for retirement planning as well), I have my HSA as a tracking account and just make a transfer to the Qualified Medical category.

    I found this to be the simplest and that way I'm able to bypass a step by avoiding the TBB and then have to budget it from there.

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    • I_NAB Hi, I just came across this thread while wondering how I should add an HSA to YNAB.  I realize this thread is primarily focused on FSAs but for those that are also tracking FSAs have you found it easier to add them as a tracking account or is it better to add them as a budget account and add individual transactions?  My original plan was to pay bills myself and then submit for reimbursement, however my claims dashboard gives me the option to pay from my HSA directly which is definitely more convenient.  Would appreciate any thoughts on this.

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      • dakinemaui
      • dakinemaui
      • 8 days ago
      • Reported - view

      Tomato Barnacle I would not use an on-budget account because that would have to be synchronized to a category (a sure sign you're making things harder than necessary). I keep my HSA out of YNAB entirely. Expenses I pay with an on-budget account are categorized to a Medical Reimbursement category, and the subsequent inflow (reimbursement from the HSA) is categorized to that same category. Expenses I pay directly from the HSA are not even in YNAB.

      You could add the HSA as a tracking account, providing the balance in YNAB, but eh... It's easy to see that on your HSA statement. Reimbursements would be recorded as categorized transfers in that case. Expenses directly from the HSA would be recorded directly in that HSA account (no category, of course). Again, I'd skip this, but others might want to put in the effort.

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    • dakinemaui Thanks, this makes perfect sense.  Only remaining question I have is how to account for making contributions to my HSA: if I'm not tracking, I can't enter it as a transfer.  To keep things simple and to keep the HSA out of YNAB, maybe the best approach would be to add HSA as a payee and then just count the expense against a medical category?  Most contributions to the HSA are via payroll deduction so I don't have to account for them if I keep the account separate, but this year (and hopefully subsequent years) I may want to make additional contributions to try and get closer to the allowable limit.  

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      • Superbone
      • YNAB convert since 2008
      • Superbone
      • 8 days ago
      • Reported - view

      Tomato Barnacle I track my net worth in YNAB so I have my HSA as a tracking account. My HSA contribution are made directly from payroll so I just update my balance monthly based on the current value at the end of the month. I add "Contributions + Market Changes" to the memo field for this monthly adjustment.

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      • Annieland
      • YNABbing every day since 2009!
      • Annieland
      • 8 days ago
      • Reported - view

      Tomato Barnacle I'm in the minority, but I have my HSA on-budget.  It is the **ONLY** account I match balance to category.  It might be a couple extra steps sometimes, but since it's not used daily it hasn't been a big deal.  I have a recurring deposit scheduled on paydays, categorized to the HSA category.  Anything I spend directly from the HSA via debit card gets categorized to the appropriate medical category.  Anything I need to pay up front and wait for reimbursement on gets budgeted by me separately, and then I reimburse myself later.

      It can get a little tricky if it's a medical expense you pay up front, have to submit to insurance, and then request reimbursement for the balance from the HSA.  But it's just a little money moving which doesn't take much longer than entering a transaction or two.  But I totally understand why the tracking option is more viable for most people.  I'm just saying it can be done the other way too.

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      • dakinemaui
      • dakinemaui
      • 8 days ago
      • Reported - view
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      • Superbone
      • YNAB convert since 2008
      • Superbone
      • 8 days ago
      • Reported - view

      Annieland I should add that I don't spend from mine so all the more reason it should be a tracking account for me. I pay for my medical expenses out of pocket and let the HSA grow like an additional IRA.

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      • I_NAB
      • I_NAB
      • 8 days ago
      • Reported - view

      Tomato Barnacle Due to the benefits of an HSA I track it as an investment account. When I reimburse myself I just do a transfer. I only reimburse myself when I have to, so maybe a few times a year.  I'll usually just transfer it to TBB, but you could just transfer it to whatever category you pay your medical expenses from.

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    • Superbone  Thanks this is very helpful. 

      Reply Like 1
    • Annieland Thanks, this is definitely a good perspective.  I was trying to avoid a bunch of manual entry although there really aren't a ton of entries to begin with, so maybe it doesn't matter as much as I think. Thanks for chiming in.

      Reply Like 1
    • dakinemaui Fantastic, thanks so much for all your help.

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    • I_NAB Problem is I pay expenses directly from the account as I can do it conveniently from my insurance claims dashboard. That said, I could just enter those as payments, I don't think YNAB will ask me to categorize them for a tracking account.

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      • Annieland
      • YNABbing every day since 2009!
      • Annieland
      • 8 days ago
      • 1
      • Reported - view

      I_NAB Superbone I know you guys are doing the best possible practice for HSAs.  This was only my first year of having an HSA and it looks like I'll have about $1500 in it by the end of the year, if I'm lucky (and I maxxed it!).  Maybe if I don't have $2600 in completely uncovered expenses next year I might make it over that $2k threshold to start investing the darn thing.  Next year I signed up to do the max HSA again AND the max LPFSA since I ended up with dental and vision expenses that went above and beyond this year.  Plus, braces coming up I think.  I've already moved everyone's eye exams to Jan.  It's making me really nervous as my husband's take-home is like 46% of gross now, but I asked him what he thought and he said "Yeah, sign up for whatever, I'm sure you know what you're doing." 😬  I just wish he'd let me put post-its on his cards because he keeps trying to pick up my prescriptions with the LPFSA card and it gets rejected so I have to do a whole reimbursement roundabout.

      Sorry for the ramble.  Basically, yes if I was using it mainly as an investment vehicle it would be waaay off budget.  I'm just not there yet.  Various out of network medical charges have strained my budget for years and I'm trying to get things stable for now.

      Reply Like 1
    • Tomato Barnacle 

      We have a short article on handling HSAs and recommend setting up that account as a Tracking Account in YNAB. This will allow you to enter your transactions and monitor your account balance.

      Here are a couple of things to keep in mind:

      • You can set up a Scheduled Transaction within your HSA Tracking Account as an inflow to track payroll contributions to your HSA account. Your balance will be updated with each contribution.
      • When it comes time to cover a medical expense using funds from your HSA, enter an outflow transaction in your HSA account. You can include a memo if you'd like to track the details of the expense.

      If you make contributions to your HSA outside of payroll deductions, you can create a category in your budget for those contributions. Budget for HSA contributions in that category and enter a transfer (from your checking account to your HSA account, for example) to record the contribution.

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  • dakinemaui said:
    Expenses directly from the HSA would be recorded directly in that HSA account (no category, of course).

     No, no I use a category.  I just move money from the HSA category.

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      • dakinemaui
      • dakinemaui
      • 8 days ago
      • Reported - view

      Annieland I was talking about the "HSA as a tracking account" scenario when I said to record HSA-paid expenses without a category.

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      • Annieland
      • YNABbing every day since 2009!
      • Annieland
      • 8 days ago
      • Reported - view

      dakinemaui Ohhhhhh sorry :).  Neeevermind then.

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      • dakinemaui
      • dakinemaui
      • 8 days ago
      • Reported - view

      Annieland no worries, with so many options being discussed, it's easy to lose track. 😆

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