Hi all - getting my Foundation Template set up and would love ideas for tracking health insurance reimbursements (i.e. reimbursed costs after submitting claims for out of network providers) and FSA reimbursements. Welcome any ideas for how to categorize in a meaningful way when for this kind of irregular expense when the reimbursement comes at least a month after the expense.
I will explain the FSA and let you extrapolate for the rest but let me know if you need more assistance.
Let’s say you get paid monthly and you contribute $1,200 to the FSA for the plan year. Your employer will deduct $100 out of each paycheck. When your paycheck comes into Tiller, use the splitter tool to gross up your net paycheck and show all the payroll deductions. Code the gross to income and all the deductions to expense except for the FSA deduction, code that one to transfer. When you receive your claim reimbursements, code those to transfer too. Code all your medical costs just like you would had you not done the FSA. If everything goes according to plan, those two transfer accounts (+1,200 and -1,200) will net to zero for the year. This may seem like overkill but at the end of the day I think you will be glad you did it.
This is really smoke and mirrors and is solely a creature of the tax law. $1,200 of your payroll for the year is not subject to federal income tax, Social Security tax, Medicare tax, and state income tax. Let’s put some numbers to this. (22+6.2+1.45+9=38.65). (1,200*.3865=463.80). So, you save $464 for all of your effort. The maximum FSA contribution is $2,750. (2,750*.3865=1,062.88). So, if you contribute the maximum, you save $1,063.
An Extra Bonus - Let’s assume the following. The plan year is the calendar year, you get paid monthly, you elect to contribute $2,750 for the plan year, you have a medical procedure performed during January, your share of the cost is $5,000, you pay the $5,000, you submit a FSA claim and are paid $2,750, and you sever employment with your employer at the end of January. Result - The employer deducts $229 (2,750/12) from your January paycheck and you are in the clear. The employer cannot come after you for the remaining $2,521 (2,750-229).
Thanks so much, very helpful and appreciate the detail!
Thank you very much for this description. I’ve used a couple of your posts to help build my tiller sheet. Many thanks!! I have a question on FSAs though that I’m having a tough time wrapping my head around, and would love your take on it. The best way is to give an example:
Right now, Lets say I have Gross Income of 2000 a month. Taxes, Retirement contributions, and $100 in Dependent Care FSA contributions get taken out, so that after all that my net paycheck is 1000. When I have daycare costs, I pay them with my credit card (so they show up as expenses on my transactions), and then submit them for reimbursement to my FSA. FSA sends me a direct deposit for the reimbursement. That deposit into my checking account is coded as transfer. All that makes sense to me, and is what you described above. But here is where it gets confusing.
My work is allowing me to increase my FSA contributions mid-year, which is great. So Stating in July, I’ll contribute $200 (instead of original $100) to the FSA. My Gross Income is the same at $2,000, but my net income is now reduced by the $100 that I’m adding to the FSA. Net is now $900 not $1000. I know that the FSA is all smoke and mirrors, but this change has an actual impact on my budget. I like to set my budgets so that income and expenses (savings is coded as an expense) equal zero. But now I have to find $100 a month in my budget because I’m contributing more to my FSA… even though my true expenses won’t change, and in fact I’m saving even more money because of the tax advantage. I feel like I’m missing something here because the impact to the budget is real!
I have a similar approach, previously with my HSA, and now with my FSA. I handle reimbursements as transfers like you described. I started tracking my gross paycheck and recording all deductions, so I have a deduction transaction (expense) for taking the funds from my paycheck, and a contribution transaction (income) for adding the funds to my HSA/FSA. This could also be categorized as a transfer, but I felt it better to stay consistent with all of my other deductions. Before I started tracking gross income and deductions, I only had the contribution transaction (income). In either case, scale your deduction and/or your contribution according to your increased contribution election and your budget should remain balanced.
Ah, very interesting. Your approach would solve the budget problem for sure.
Actually, thinking through your comment made me realize an error in how I was originally thinking about my issue, which may also solve the problem.
When I split out my paycheck I have “Net Paycheck” Category, which is what is deposited in my checking account every two weeks. I also have a “Gross - Net Paycheck” Category. Which is Gross Income minus the amount deposited into my account. So in my example, Currently I have a Gross Income of 2000, which shows up in Tiller as two transactions
“Net Paycheck” +1000
“Gross - Net Paycheck” +1000
All of my Paycheck deductions come out of the “Gross - Net” , including the FSA contribution. All the deductions added together will equal the Gross - Net income.
In my orginal question, I think I mistakenly assumed that the “Gross - Net Paycheck” would stay the same, but in reality it would increase. So if I added $100 in contributions to my FSA the effect would be;
“Net Paycheck” +900
“Gross - Net Paycheck” +1100
By increasing the “Gross - Net Paycheck” Category, it offsets the increase in the FSA contributions too. So My Overall Income will stay the same, which I think means I wouldn’t have to do any budget adjustments. I think that sounds right…
In my orginal question, I think I mistakenly assumed that the “Gross - Net Paycheck” would stay the same, but in reality it would increase.
By increasing the “Gross - Net Paycheck” Category, it offsets the increase in the FSA contributions too. So My Overall Income will stay the same, which I think means I wouldn’t have to do any budget adjustments.
I think you found the solution!