A healthcare flexible spending account (FSA) is a smart and easy way for employees to save money while protecting themselves from the high cost of medical bills. Because FSAs are set up as a tax-advantaged account, participants can save up to 40% on thousands of eligible everyday expenses*. The best part for employers? Since contributions are taken out pre-tax, the taxable incomes of those that participate are reduced -- providing employers with a tax-saving opportunity equal to that of the tax on the employee’s payroll deduction. 

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Additionally, FSA accounts allow employers to enhance their benefits package by offering an appealing, money-savings solution, helping you recruit and retain highly-talented employees.

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* Eligible expenses include those related to medical, dental and vision that are not covered or previously reimbursed by an insurance plan. Participants can also shop eligible expenses online through the FSA Store.

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There are two basic types of flexible spending account

Health FSAs reimburse employees for eligible medical expenses that are not paid for by any other source. These expenses can be incurred by the participant, their spouse or their eligible IRC Section 152 Dependents. Eligible expenses include deductibles, co-pays, vision, dental and prescriptions as well as any other medically necessary items that are not covered by insurance.

Dependent Care FSAs reimburse employees for eligible dependent day care e xpen ses. These expenses must be incurred to allow the employee and their spouse to be gainfully employed. Eligible expenses include a babysitter, daycare, afterschool programs and day camp. The expense must be incurred while the employee and their spouse are working. Dependent Care Reimbursement is only available for the care of Children under the age of 13 or a spouse or dependent who is physically or mentally incapable of self care.