JoeTaxpayer

There are times I get a comment that’s both long enough and insightful enough that I request the author’s permission to put it up as an article. The follow guest post is from Andrew Chunis, the Business Manager at Advanced Benefit Strategies, a third party administrator of employee benefits. Andrew makes a compelling case for improvements to the FSA, not elimination. Thank you, Andrew, here’s your comment-turned-article, unedited.

Gonna have to disagree, Joe. Hear me out:

First on administration cost: Typically a third party administrator bills the employer a monthly fee per enrolled employee. However, depending on the average election, the employer is usually saving much more in taxes per employee than the monthly fee incurred, based on their FSA funds coming off of payroll.

Now the alternative to an FSA would be itemizing deductions on a Schedule A, which is currently limited to expenses greater than 7.5% of your adjusted gross income. As we know, itemizing deductions greatly increases the risk of triggering an IRS audit. For the average person this is a complex procedure to be able to enjoy all the benefits of an FSA (saving receipts, making sure you have your RX for tylenol, etc.), and the penalties and government administration of these expenses would be far higher than FSA administration. Further, this would also likely increase the administration at tax service centers such as H&R block.

So far from being overly complicated, the FSA actually simplifies the tax process for the participant a great deal, simply by removing these funds off their W2. Without question, the average person currently receiving tax benefits on their FSA would not get the same benefits on itemized deductions. And any “efficiency” costs would be rendered moot by greater IRS auditing procedures and third party tax preparers. As far as the government is concerned, the plans are a win-win-win benefit. Win for the government: outsourcing administration to a private party; win for employers: receiving a tax benefit simply by having a plan in place; and win for the employee: removing these funds from their W2 to enjoy their tax savings.

Also, technology is simplifying the FSA process a great deal. We have FSA debit cards that can process transactions at the point of service: eliminating the reimbursement process. We have smart phone apps that can read your documentation and automatically submit for reimbursement/adjudication. We have dependent care affidavits that only have to be set up once and automate the reimbursement process for the rest of the year.

Rather than scrapping the Flexible Spending program, we should really be expanding it. Some of the proposed legislation would have fixed some current issues with the plans: add a possible roll over for unused funds, allow for OTC items without an RX, and possibly even use the accounts for health and wellness expenses such as gyms and exercise programs.

It does look like the current administration would like to kill the FSA, which would be unfortunate. They are probably one of the main tax benefits working class people can enjoy, besides maybe the EITC.

I will say though that employers would do right by getting a quality administrator for their plan, rather than just looking for the lowest cost.

It’s about time, I know. I remember last February, I ran into someone I see every month or so, and he wished me a Happy New Year. I responded in kind, but thought to myself that it was already February, time to move on. Since it’s still mid-January, I’m thinking it’s not too late to share my 2012 goals.

• Run 1000 miles. Again. In 2011, I came up short, just over 900. This year, I need to be more consistent, once behind, it’s really tough to keep up, and the time off at year end isn’t time to run at all, so I need to end November well ahead of pace.
• I still need to drop a few pounds. I ended last year about five less than I started, and this year would like to drop the last ten. The running isn’t enough. I need to stay away from the buffets, and when away from home avoid the temptation of all the sweets. Jane 2.0 has reprimanded for my eating habits, skipping breakfast and lunch and heading into dinner with a huge appetite isn’t a good habit to be in. I’m also avoiding processed flour. Cutting down on bread, pasta, and potato. Budweiser has a beer aimed at the low-carb crowd, Select 55, named for its 55 calories. No sweets, but I can have beer when I like.
• I’ve been contracted for another year of writing for TurboTax, which has taught me a bit about writing. It’s interesting to have some topics you know so well that you have to cut down on how long the article goes, and then others that are so narrow focused a bit more effort has to go into the how and why it’s important to the reader. It’s also a motivator to have a topic and a deadline compared to here, where the topics are more varied and deadlines don’t exist.
• My daughter and I are still are struggling with AnotherFineMeal.com as both of our schedules were busy this year. We put up 6 posts, and agree that in 2012 we’d like to work toward a regular posting schedule there.
• The Basement. In November of 2010, the first batch of drywall (70 sheets) was dropped off. As I got into the summer of ’11, I realized I was coming up short and I changed from wanting to put in a drop ceiling to finishing it off with drywall. So another 50 sheets were ordered. I’m now within a few weeks of being done with that and will sub out the plastering. We’ll hire guys to put the floor in and this project will be behind me. It was a long project, and will add close to $40,000 to the house’s value and tax assessment. I’ll post a few before and after pictures once this is completed.
• Finances – I’ve shifted gears. Last year I stated I’d like the mortgage paid by the summer of 17, when my daughter would start college. Instead, with rates as low as they are, we are refinancing to a fixed 15 yr mortgage at 3.5%. For some time, we’ve been saving 20% of our income, funding college savings, and prepaying the mortgage. We’ve managed to budget to such a low fraction of our income, it’s time to loosen up a bit. I still plan to pay the new mortgage at a faster pace, but now to be paid by 2021, when our daughter graduates. For the next five years, we just need to monitor college costs and add a bit to cover any increases. In other words, we have four year’s worth of college cost now set aside, at today’s rates. This decision came after a lot of time looking at the numbers, and reading articles with titles like “can you be saving too much?” I also saw a neighbor’s house for sale, a couple who both work, and have three kids. I found out they are downsizing to pull out money to use for college. We are close enough to our goals that such a downsize could let us retire. Instead, we’d like to keep working, but not worry about the extra trip or for that matter, some of the charities we’d like to better support.
• Retirement – not this year of course, but I do need to plan. Specifically, I want to be sure that each year, I am shifting out asset allocation a bit so that we are at the allocation we want at retirement. The disaster of the 2008 downturn didn’t hit those with a decent allocation quite as badly as those who were fully invested in US stocks, which is closer to how we are today.
• Last (I promise) – Declutter. No, I don’t have my gas, electric and phone bills in a file cabinet spanning decades, those get glanced at, paid, and shredded. I do, however, have too many brokerage account statements going back almost 30 years. This is the year I plan to start downloading PDFs of these statements, and discontinuing the mailings each month. My broker had access to download 10 years back, so for the accounts I need to keep cost data, I’ll download and shred. This year, the paper has to go.

Well, that’s it. Eight goals for the new year. How did you do with your goals in 2011? Do you write them down, or just think of a few, but never really do them? How many stay on the list year after year?

This Roundup will be different than most. It’s about one topic, one incident, one lesson. It also takes a bit of introduction. As I drove my daughter to basketball practice today I started to tell her about the events of these past few days. First I had to explain who Suze Orman is. She’s an author of finance books (“oh, dad, like you’d like to write one day.” Yes, sorta like that.) and she has a show on CNBC (“oh, like Kudlow.” Hmm. No nothing like Larry. Her show takes questions from people that call in and she helps them.) So far so good, She recently offered a card. A pre-paid card, yes, like the gift card you’d get, but you can use it anywhere that takes a credit card. (That’s stupid dad, who would want that? Is this for kids who can’t just use their credit card like you and mom? No, it’s aimed at adults.) Well, there was no selling this idea to my Jane 2.0, and that brings us to Thursday night. My fellow finance blogger (and host of the financial blogger conference I attended in October) Phil Taylor at his site PT Money posted an article What We Need from Suze Orman Instead of Another Celebrity-Endorsed Useless Prepaid Debit Card. It seems another blogger tweeted about it and Suze reacted.

Her tweets about this article included the above screengrab from a video at Fox Business, Suze Orman’s Card Backlash. Note that Fox appears to show some respect calling those Suze slammed “money experts.” Good move, it takes a long time to conclude whether an author is worth reading, and of course Suze fast visceral response was just wrong. Eventually she apologized, but the damage was done. As far as I’m concerned, she’s there with the rantings of Mel Gibson and Michael Richards, but not quite at the level of Kanye West’s faux pas. Now, the rest of the roundup.

Even Times Author Ron Lieber wasn’t too gung ho on the card. The Approved Card: Uses for Suze Orman’s Plastic. He does point out, as my daughter did, the card may be useful to give to a child to use as a preloaded card. Although my local mall sells these for $1.50 and no cost each month. (The mall call is a Visa, and it’s used like a credit card, anywhere Visa is taken.)

Stephen at Nerd Wallet posted Suze Orman Loses Her Sh*t on Twitter. More than a recap, Stephen dug up some of Suze’ responses to tweeters asking about such cards. All her replies were in favor of using secured cards instead.

Lazy Man and Money posted Suze Orman’s Pre-Paid Debit Card Scam. Before you dismiss this as a false accusation, remember, there’s no credit involved and the idea that it will help your credit report remains to be seen. Appropriate to add here, Suze is working with Transunion to see if the spending data can be used to help one’s credit. At present, it’s a science experiment, which is clear if you read the fine print very carefully.

At Beating Broke, Suze Orman Releases Prepaid Card. Wait, What? A level-headed discussion of the card’s features, and disappointment in Suze for her rant.

20 and engaged gets the prize for her Suze Orman’s “Approved Card” Gets Denied; Thinks PF Bloggers Are Idiots or at least for the fact that it was her tweet that Suze responded to which started the ruckus. Briana gives a great overview of the tweets Suze sent during this time. You’d think she’d have a bit thicker skin.

Elle at Couple Money (not to be confused with Elle, one of my readers and sometime guest poster, more about her later) posted Suze Orman’s Approved Prepaid Debit Card Causes a Stir. Elle is kind, “For those with limited banking options or those who have bad credit, the card may work for them.” I agree, this card may have limited use. For a very few people who can’t even get a debit card from their own bank. Yes, Elle, I was shocked at Suze rant.

Miranda Marquit at her Planting Money Seeds wrote Even if Suze Orman’s Name is on the Card Prepaid Debit Sucks. Miranda doesn’t leave us wondering “so what do you really think?” No, sir, “While the Approved Card is less crappy than other prepaid cards, it still sucks.” Yup, that’s right on target.

The Mighty Bargain Hunter gives us My two cents on Suze Orman and her prepaid card. Here’s one of the most balanced discussions, kudos to my friend MBH. Best line? “This can’t be taken from her: She’s done well for herself on this earth by helping a lot of people.” And I’ll concede, this is probably so.

Jeremy Vohwinkle helps us understand the fees this card has with his article Suze Orman Shows True Colors With Her Approved Prepaid Debit Card. Wow. Those dollars do add up. He also talks about the experimental nature of this card and the work with Transunion behind the scenes.

At Graduated Learning: Life after College, The Approved Card? More like the DIS-Approved Card! An insightful post concluding “I just think that this is a bad move on her part, using her fans’ trust for financial gain.” Yes, indeed.

Cash Flow Mantra exclaimed Suze Orman, WTF?! (to be clear, the acronym stands for ‘Why the fees’?)  ’nuff said

Jim Wang at Bargaineering doesn’t mince words with Why Suze Orman’s Approved Prepaid Debit Card is Terrible. Jim wonders why celebrities don’t learn from each other’s mistakes. Me too.

And last, really, At Make Spend Save Invest,  Is Suze Orman’s Approved Prepaid Debit Card Right For You? Some more details about the card itself, but the same conclusion, “no.” As many of us believe, a secured credit card is the way to go for those who cannot qualify for a real card.

Now to end this already too long post, about my reader Elle. When I first started blogging about three years ago, Elle knew me from a Usenet group misc.taxes.moderated, where not long ago, I was made an honorary moderator. At my blog I posted an article in which I was, shall I say, unkind to Suze. Elle called me out on it, suggesting that name calling and unkindness didn’t suit me (in so many words) and I took her note to heart. I apologized to Suze on my blog, and edited the original article. Since then, I’ve stuck to the facts, and refrained from nasty name calling, or at least tried to. And I’m grateful to Elle for her kindness and support. If you, my reader agree with everything I write, that’s ok, but I won’t grow from that. I hope my readers will continue to challenge me, question me and teach me a lesson now and then. In return, I promise to listen, and to never call my readers anything but friend. To call someone an idiot without knowing more than the fact that he doesn’t like your card isn’t saying much, it’s just overreacting. As many have said, Suze, in fact, has helped many, and I’m willing to cut her some slack, but she needs to know one thing. The financial realm contains many finance bloggers, and combined, we have millions of readers from all walks of life. We have different opinions, and disagree on some issues, but we are far from idiots. And our readers know us from our work. Most of which is done for the love of finance, not to push any product.

The numbers are slowly (very slowly) starting to look a bit better. The recession ended some time ago, but are we finally going to see what looks like a real recovery?