After Losing Her Job, She Had Hours to Spend Down a $2,500 FSA — So She Bought Items to Donate
Key takeaways:
A flexible spending account (FSA) can be a great way to save money for medical bills, tax-free.
But if you don’t use all the funds, you can lose money when you change jobs.
Tracey Radabaugh used her leftover FSA money to buy items to donate to charity.
My Bill of Health is a series of stories about the financial strain of healthcare.
When Tracey Radabaugh and her husband started planning to have a second child, fully funding her flexible spending account (FSA) was an easy decision. The couple had used the program twice before: first when she was pregnant with their daughter, and again when he was planning to get LASIK surgery and she needed braces.
“It worked out really well,” says Tracey, a 38-year-old executive assistant in Camas, Washington.
During her first pregnancy, “even though we had a wonderful insurance plan, we still ended up spending all of that money on doctor’s appointments, checkups and all that. The money went really quick,” she says.
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So, when her employer’s open enrollment period came up at the end of 2021, she once again put in the maximum amount: $2,500.
FSAs are special accounts that are part of some employer-sponsored health benefits. They can be used to pay for medical costs. You don’t pay taxes on money you contribute to the account. Money can be used to cover out-of-pocket expenses like copays, pharmacy, dental work, and orthodontia.
Usually, there’s a limit on how much you can contribute annually, as well as how much you’re allowed to roll over at the end of the year if you don’t use all the money.
From hope to disappointment
Once again, Tracey got pregnant right away. The couple began looking forward to growing their family — glad they had set aside money for medical bills. But sadly, she ended up having a miscarriage after about 7 weeks.
“We figured if we just waited a couple of months and then tried again, we would still be able to use up enough of the money, and maybe roll over $500 at the end of the year,” Tracey says.
But those plans changed when Tracey lost her job suddenly in July 2022. When she got the news, she initially thought she’d have until the end of the month to use the money in her FSA. After all, that’s how long she had to use her health insurance.
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But when she got her severance paperwork later that afternoon, she learned she had to use up the funds by the end of the day. If she didn’t, she’d lose the money.
“Had I known it was going to be shut off like that, I would have started calling and making medical and dental appointments for my family, and prepaying some of the copays,” she says. “But at 4 o’clock on a Friday afternoon, a lot of places were closing, and it was too late at that point.”
Then, she remembered the FSA store, an online platform where she could use her account to shop for health and medical items. Tracey had used it before. She knew she could buy first-aid supplies and personal care products.
Tracey started filling her online shopping cart with items her family used regularly.
“I bought a ton of sunscreen for myself, Band-Aids, Neosporin, and feminine hygiene products,” she says. “They even had that new washable period underwear, so I bought some of those.”
Then, she called her relatives to ask what items they needed.
“Even then, I only spent maybe $300 bucks,” she says. “I was not even close to using the $2,500. I was like, I have to use up this money, but I’m never going to use all these products.”
Shopping for charity
That’s when Tracey started thinking about buying items to donate.
“My first instinct was, ‘I’ve got to use this money for my family,’” she says. “But then, I realized it’s a little too late. And that’s OK. I didn’t want the money to go to waste. I’d much rather use it to help people who are in much more dire straits than I am.”
She bought bandages, diapers, period products, and other items that might be useful for struggling families. She spent more than $2,000 to use up her FSA.
Tracey donated the items to the Children’s Home Society of Washington, a local nonprofit that supports families in need. The organization was very appreciative. Toiletries and personal care products were some of their most-needed items.
The experience helped remind Tracey to be grateful. She was glad her family was in a financial position to weather the loss of her job, and that she could still have another child.
“It was turning lemons into lemonade,” she said. “I could have lost that money, but I didn’t. I got to give it to somebody else who really needs it.”
Tracey isn’t new to giving back. She and her husband have long been passionate about charitable work. That includes supporting organizations that help families of children with mental health needs.
In spite of the stressful experience of losing her FSA, she says she still likes FSAs and would use them again in the future. But she says people should plan ahead and think about how and when they would use the money.
“I wouldn’t use it every year,” she says. “But if you’ve got big surgeries or things that are coming up medical-wise, or health-wise, then FSAs are wonderful.”
This article is solely for informational purposes. This article is not professional advice concerning insurance, financial, accounting, tax, or legal matters. All content herein is provided “as is” without any representations or warranties, express or implied. Always consult an appropriate professional when you have specific questions about any insurance, financial, or legal matter.
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