Setting up a Flexible Spending Account (FSA)

ilovemath david at
Sat Jun 29 19:26:28 EDT 2013

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.
> 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.
> 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@

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Hello, All.  I've been a lurker on this board for a while and I appreciate
the brilliant ideas people have shared.

To quote Douglas Adams, "“The storm had now definitely abated, and what
thunder there was now grumbled over more distant hills, like a man saying
'And another thing...' twenty minutes after admitting he'd lost the
argument.” (So Long, and Thanks for All the Fish).  This post is about four
months after the discussion closed but may be useful.

Here's a summary of the drivel in my post:
1. Annual election decreases Equity:FSA and increases Liabilities:FSA.
2. Payments for quacks and pills are entered into check register (or Cash in
Wallet register) and the other side goes into
Expenses:Medical:Taxable:[Category].  The parent account,
Expenses:Medical:Taxable, is NOT a placeholder.
3. I create claims by going to Accounts, selecting Expenses:Medical:Taxable
and "Open Subaccounts," then View->Filter and clearing the "Reconciled" box
under the "Status" tab.
4. I record claims by reconciling Expenses:Medical:Taxable and Including
Subaccounts, then checking off all items included in the claim.
5. After reconciling, I create a journal entry increasing
Expenses:Medical:Taxable and reducing Expenses:Medical:Non-Taxable (FSA).
6. Reimbursement checks go into the checking account register with the
balancing entry going into Equity:FSA.
7. The goal is to have Equity:FSA=0 at the end of the year and
Expenses:Medical:Taxable=0.  If they're not, the Equity gets a journal entry
moving the balance to Expenses:Medical:Money I've Tossed and
Expenses:Medical:Taxable is moved to Expenses:Medical:Schedule A.

This covers every aspect I've faced, and it is effective if you have a
run-up or grace period.

I also used Mr. Carter's post as a basis for my accounts, but I modified the
expenses a wee bit.  I have:
Expenses:Medical:Taxable:[various categories of expenses, such as Physician,
Prescription, etc].
I also have "Expenses:Medical:Non-Taxable (FSA).  Note that the
"Expenses:Medical:Taxable" is NOT set up as a placeholder.  As I pay bills,
I post the check register's balancing entry to the "Taxable" subaccounts.

At the beginning of the year I have a scheduled transaction to decrease my
FSA Equity account (I actually have a subaccount for each year, but that
wasn't one of my brightest ideas) and increase my FSA liability, and each
paycheck reduces the liability by the deduction.  As an aside, I'm not a
bean counter (my undergrad degree was applied math so I have no patience for
arithmetic), but I am pretty confident that the appropriate place for the
annual allocation is in an Equity account and not an Asset.  An asset is
liquid or can be converted to liquid, and an FSA doesn't fall into that
category--it doesn't have a liquid value until a claim is submitted.

When I submit a claim for reimbursement, I go to the
Expenses:Medical:Taxable parent account, and choose "Open Subaccounts" to
view all of the various expenses I've posted in categories.  I change my
view to not show reconciled transactions, giving me a list of transactions
to submit.  After I've submitted my claim, I "reconcile" the
Expense:Medical:Taxable account.  I accept the ending balance (but it really
shows the amount I've been reimbursed so far) and I check the "Include
subaccounts" box.  Reconciling an Expense account is backward from an Asset
account, so all of the payments I've made are in the "Funds In" box and the
reimbursements are in the "Funds Out."  I check off the items I've submitted
and the reimbursements received.  Finally, I create an entry moving the
amount of the claim from "Taxable" to "Non-Taxable."  If I go over my
account value, I add a reversing entry moving the denied value back from
Non-taxable to Taxable.  When I receive a reimbursement, it goes into a
checking account register with the offsetting entry in the Equity account
for that year.

Finally, I have an expense account Expense:Medical:Schedule A.  At the end
of the year, I clear the rest of the items in "Taxable" and create an entry
moving the amount from Taxable to Expenses:Medical:Schedule A.  My
Expense:Medical:Schedule A is a "Tax Report" account, not my
"Expense:Medical:Taxable."  One of these days I'll rename 'em so they're
intuitive but right now it ain't broke.  If I go belly-up, my wife will go
nuts trying to figure this out and maybe that way she'll miss me.

If I've used all of my election, the Equity account is zero at the end of
the year.  If I lose any part (hasn't happened yet, but I just opened my
mouth) I'll create an Expense account called "Money I threw away" and move
the excess equity over there.

One final thing--I toyed with the idea of creating an A/R entry for the
claim that I would clear with a check, but I'm a poor schlock and I know
darned well when I haven't received a check.

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