FSA that is used with a prefunded debit card, not as reimbursements

My husband just started a new job and is now contributing to an FSA for medical expenses. Due to the FSA rules, the entire amount is available for use immediately. He contributes $12 per paycheck. He has a debit card to use when paying with FSA funds.

How do we budget with this scenario?

I've read the reimbursement Help Doc and scoured the forum for FSA threads. They all refer to reimbursements, not using a debit card and having payroll deductions.

So far I have set up an on-budget account for the FSA. Our paycheck transactions start with gross income then distribute the withholdings to the appropriate categories, including $12 transfer to the FSA.

How can I show that the full year's amount is available? If I have an income transaction with the full amount, then the bi-weekly transfers put more money into the account than is really available. I could bypass the initial deposit and let the account balance go negative if we spend early, but that's not totally accurate either.

Thanks,

Nancy

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    • nolesrule
    • Stealing From the Future fix is an improvement but is incomplete....
    • nolesrule
    • 3 yrs ago
    • 1
    • Reported - view

    Keep it out of the budget entirely. If you need to track the balance in YNAB, use a tracking account.

    FSAs are single use accounts, so they essentially are their own category and you can't use the money for other purposes. So there's no reason to include these accounts in your budget.

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  • nolesrule , that makes sense.

    I can see 2 ways to do the transactions.

    1. Transfer our amount to it each paycheck. If my husband spends more than he has put in then the balance will go negative in YNAB even though the money really was available.
    2. Prefund it because the insurance company really is funding it all at the beginning. If I do this, then what do I do with the money from the paycheck each time?
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    • nolesrule
    • Stealing From the Future fix is an improvement but is incomplete....
    • nolesrule
    • 3 yrs ago
    • Reported - view

    Don't track the breakouts of your paycheck. You only need to inflow the net takehome pay for use in your budget. Things like taxes, insurance, FSA, 401k don't need to be accounted for when you just inflow your net pay.

    For the off-budget HSA account, just set it to the full amount. You can have transactions to track the individual draws or just reconcile once a month to change the balance. Or don't even include it in YNAB at all.

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