Setting up a Flexible Spending Account (FSA)

Tue Feb 12 20:12:28 EST 2013

I believe the solution is a combination of Makai's account setup and
Ross's procedure:

Accounts:

Assets:Checking
Assets:FSA
Expense:Doctor
Income:Salary
Liability:FSA

Transactions:

Paycheck: Split:
  Debit Assets:Checking by net salary
  Debit Liability:FSA by FSA contribution
  Debit other deductions appropriately
  Credit Income:Salary by gross salary

Doctor's Visit:
  Debit Expenses:Doctor
  Credit Assets:Checking

Reimbursement:
  Debit Assets:Checking
  Credit Assets:FSA

Year-End overage:
  (Note: Liability:FSA should be empty)
  Debit Expenses:Miscellaneous for FSA balance
  Credit Assets:FSA for balance

Separation from Employment, Mid-Year
  Debit Liability:FSA by balance
  Credit Income:Miscellaneous

The idea here is that the available FSA amount is an asset, countered
by the liability that you have to repay.

Actually, this doesn't solve the Makai's original problem.  I suspect
that he/she figured it out this far.  The question was:  How can
he/she keep track of the unreimbursed medical expenses so she/he knows
which receipts need to be processed for reimbursement.

Here's a potential solution:  Use the "cleared" flag on the
transactions in the Expenses:Doctor account:  When you submit a
receipt for reimbursement, mark it "cleared" in that expense account.
Then you can see, looking down the account, which bills have, or have
not, been reimbursed.

There may be a better solution.

On Tue, Feb 12, 2013 at 7:56 PM, David T. <sunfish62 at yahoo.com> wrote:
> Ross--
>
> It turns out to be a little more complicated than this. As the person behind the discussion that Makai referenced, I can say it's confusing. Especially since I am NOT AN ACCOUNTANT!
>
> The way that the US has set up Medical FSAs, the individual commits to a dollar amount before the year begins--say $5000. This is a Liability to the individual, since you are committing to pay that $5000. So, at the start of the year, you transfer $5000 from Liabilities:FSA to another account. I've used an Equity account, although I imagine that's wrong. This leaves both with $5000 balances.
>
> Each paycheck deduction goes into paying off the liability account (you're paying back the amount you said you'd use), and it should zero out at year end.
>
> Medical expenditures go from Checking -> Expenses as you note.
>
> I'm a little fuzzy about the reimbursement side, but when I get a reimbursement check, I transfer from the Equity account to my Checking account. This may or may not be right or right for you. It seems to mostly work for me; if I do things right, then the Equity account zeroes out at year end as well. Well, sort of, since the re-population and the final payouts tend to overlap.
>
> There are tax reporting complications that this method doesn't seem to work well with--for example, it has never been clear to me the clean way to report the medical expenses that are deductible, that is, the expenses that weren't reimbursed from the FSA. (It doesn't help that most FSAs are run by Insurance companies who do a lot to obfuscate the origination of money they pay to you--is it an insurance payment or an FSA reimbursement). This approach gives you a total medical expense number, which I guess you have to reduce by the reimbursement amounts. I keep thinking there's a better way to handle this…
>
> David
>
> On Feb 12, 2013, at 4:11 PM, Ross Boylan <RossBoylan at stanfordalumni.org> wrote:
>
>> On Tue, 2013-02-12 at 17:41 -0500, makai wrote:
>>> Hi,
>>>
>>> Seting up an FSA in GnuCash boggles my mind.  I have these accounts created:
>>>
>>> Asset:CurrentAccounts:Checking
>>> Asset:CurrentAccounts:FSA
>>> Expense:Doctor
>>> Income:Salary
>>> Liability:FSA
>>>
>>> The liability can be reduced monthly via a split from my salary.  That makes
>>> sense because I've basically loaned the money to myself and I pay back the
>>> loan over time.
>> I've taken a simpler approach that does not track which expenses have
>> yet to be reimbursed or the maximum available annual benefit (so maybe
>> it's not simpler, since I'm trying to develop a system for that...).
>> I'm using Managing Your Money, but the same principles should apply.  I
>> treat the FSA account as essentially another checking account.
>>
>> I don't have a Liability:FSA account.
>>
>> If you get $100 in income, of which $20 goes to the FSA that is
>> Income:Salary 100
>> Asset:Checking 80
>> Asset:FSA      20
>>
>> When you pay a doctor you incur the medical expense
>> Asset:Checking -50
>> Expense:Doctor  50
>>
>> When you get reimbursed from the FSA
>> Asset:Checking 50
>> Asset:FSA     -50
>>
>> If you fail to exhaust the benefit at the end of the year:
>> Asset:FSA 800
>> Expenses:Unused FSA 800
>>
>> In this approach the FSA balance could go negative for awhile if you use
>> up more of your annual benefit than you have paid in.
>>
>> Ross
>>>
>>> But there are two transactions which I don't understand: incurring an
>>> expense and receiving a reimbursement from the FSA.  This thread got me
>>> half-way there, but doesn't answer the question about how track the
>>> reimbursement.
>>> http://lists.gnucash.org/pipermail/gnucash-user/2009-January/027937.html
>>>
>>> When I incur eligible medical expenses, I would like to transfer them from
>>> Checking to some sort of receivable account.  This will remind me I have
>>> receipts I need to send in (in the same way as do my reimbursable work
>>> expenses; and the similarity of this situation to reimbursable business
>>> expenses is confusing me badly).  Then, when I get reimbursed for the
>>> expenses the money has to end up in a medical expense account, like Doctor,
>>> because at the end of the day, I'm paying out the money.
>>>
>>> Loaning myself the money (funding the FSA at the start of the term)
>>> Liability:FSA -> Asset:CurrentAccounts:FSA
>>>
>>> Paying off the loan (monthy)
>>> Income:Salary -> Liability:FSA
>>>
>>> Incurring an expense
>>> Checking ->
>>>
>>> Receiving a reimbursement
>>> Expense:Doctor ->
>>>
>>> How do I set up the tree of accounts, and what would the transfers be?
>>>
>>> -Makai
>>>
>>>
>>>
>>> |\/| /\ |< /\ |
>>>
>>> makai at digiplasty.com | skype: makai.smith | cell: +1 610 812 9463
>>>
>>>
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