125 Plan And Employer Out Of Business

[Guest moosegirl]

An employee has contributed monthly to a flexible spending account and has not submitted any claims for the year. The employer goes out of business during the year. The employee pays out of pocket for expenses that he planned to pay with his FSA contributions. Does the employee get any tax deduciton for the amount lost other than the medical expense deduction subject to the 7.5% limitation?

[papogi]

Any eligible medical expense not reimbursed through a health FSA can be written off on Schedule A subject to the 7.5% AGI rule. No deduction is allowed for any amounts lost or forfeited in an FSA.