Flexible Spending Account (FSA) Defintion

A Flexible Spending Account (FSA) is an employer-sponsored benefit that enables employees to allocate a portion of their pre-tax salary into the account, which can be used to pay for eligible medical, dental, and vision expenses not covered by insurance, as well as dependent care expenses. FSAs are "use it or lose it" accounts, meaning any unspent funds at the end of the plan year typically do not roll over to the next year.

Flexible Spending Account (FSA) Strategies

• Employee Education

Educate employees about the benefits of FSAs, the eligible expenses, and the process to enroll and use the funds effectively.

• Communication

Regularly communicate with employees about FSA deadlines, contribution limits, and eligible expenses to encourage participation and utilization.

• Open Enrollment Support

Provide assistance during open enrollment to help employees estimate their expected medical and dependent care expenses and determine appropriate FSA contributions.

• Roll-Over Options

Consider offering a grace period or carryover option to allow employees to utilize leftover FSA funds from the previous year.

• Integration with Benefits

Integrate FSA information into overall benefits communication to ensure employees understand the role of FSAs in their comprehensive benefits package.

Flexible Spending Account (FSA) Examples

• Medical Expenses

FSA funds can be used for co-pays, deductibles, prescription medications, and other qualified medical expenses.

• Dental and Vision

FSA funds can cover expenses like dental cleanings, braces, glasses, and contact lenses.

• Dependent Care

Employees with dependents can use FSA funds to pay for eligible child or elder care services.

• Tax Savings

By contributing to an FSA, employees lower their taxable income, resulting in reduced income tax liability.

• Convenience

FSAs offer a convenient way to set aside money for expected healthcare and dependent care expenses.