A Flexible Spending Account (FSA) is a pre-tax benefit used to pay for eligible medical expenses, drugs, other out-of-pocket health care costs and dependent care expenses. This is an employer sponsored plan and employers may contribute to the plan but aren’t required to.
FSA Benefits
- Employees can use pre-tax money on eligible healthcare/dependent care costs
- Reduces employees taxable income and increases spendable income
- Employers save on payroll taxes
FSA Requirements
FSA plans are governed by Section 125 of the IRS tax code. Employers with a FSA plan are required to have:
- A current Summary Plan Description (SPD) available to all plan participants
- A Plan document