Flexible Spending Account

A Flexible Spending Account (FSA) is a reimbursement program that employers can set up to financially assist workers with their healthcare expenses. An FSA allows workers to set aside pre-tax money from their paychecks to pay for a variety of eligible expenses. Two types of FSAs exist:

• Covers eligible health care expenses not reimbursed by any medical, dental, or vision care plan that workers or their dependents may have.
• Eligible dependents for this account include a spouse, child, and any other person who is a qualified IRS dependent (in essence, anyone claimed on federal income taxes as a dependent).

• Covers eligible dependent care expenses incurred so employees can work, or if married, so the employee and spouse can work, or the spouse can attend school full-time.
• Eligible dependents are the worker’s children under age 13 and any other person who is a qualified IRS dependent, regardless of age, who is mentally or physically incapable of caring for himself or herself.

Because the money used in an FSA is withheld before taxes, it reduces taxable income, which in turn may lower a worker’s federal and state income taxes for the year.