I’m being displaced in October. And then I’ll have severance for most of next year. Can I enroll in a flexible spending account for 2026?
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So I had a year of severance which ended in April 2023. In December of 2022 i signed up for the full fsa amount while on severance — amazing i was able to get reimbursed for all medical expenses for the full amount which I had incurred through April even though I had not paid that amount in to the fsa. The company eats the difference — the key is the amount of expenses while still on severance. Any balance in the account after end of severance not used for expenses incurred while on severance is retained by the company
The benefit manual actually explains all
This
@a6 correction, $101K in severance let's say to make the salary of $100K + $101K severance = $201K.
Not sure about FSA, but with my company, the severance is a lump sum check dated this year. That means, not only do you have to pay taxes for the salary you earned this year which was deducted from your paycheck, but you also now have to pay taxes on the severance this year. All of the taxes this year if the severance payment from the company is a lump sum check (all of the severance for most of next year in one check dated this year). That means almost 50% of that severance amount goes to Uncle Sam (in taxes). So don't count on that severance amount last for most of next year. That money may last you only a few months into next year (depending how you spend it). Do some googling on how much in taxes was taken out from severance when it comes in a lump sum check amount. Also, your tax bracket for this will have increased due to the severance check and your yearly salary. Another words, if you were making $100K in salary and getting $100K for severance, now you have $201K in taxes to pay for this year and because you made $201K your tax bracket increased meaning you're going to pay a lot more in taxes this year on the $201K. Another words, if you normally paid taxes just on your $100K salary at 22%, now you will have to pay 32% in taxes for $201K. Do some googling and you'll see what I mean. You pay taxes as show below on the amount you earn based on the different tax brackets as shown below:
10% on income up to $11,600
12% on income over $11,600, up to $47,150
22% on income over $47,150, up to $100,525
24% on income over $100,525, up to $191,950
32% on income over $191,950, up to $200,000
I left another employer and had thousands in a FSA set aside for dental work. I thought i could still use it but the company just captures it. They told me most the time people use the money before the amount is accrued and the company gets burned, but in my case because it was toward the end of the year and i hadn't used it, i got burned. Yeah so if i was laid off i wouldn't risk putting money into a FSA. Everyone of these programs comes with 400 pages of if then else, you need to be a lawyer with 500 hours of free time to understand it. I wouldn't risk it.
No.