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Flexible Spending Accounts (FSAs)

Maximizing Your Healthcare Dollars

What is a Flexible Spending Account (FSA)?

A Flexible Spending Account (FSA) is an employer-sponsored benefit that allows you to set aside pre-tax dollars to pay for eligible healthcare and dependent care expenses. This can significantly reduce your taxable income and help you save money on out-of-pocket costs.

Types of FSAs

There are two primary types of FSAs:

Healthcare FSA: Used to pay for eligible medical expenses, such as copayments, deductibles, prescription medications, and dental care.
Dependent Care FSA: Used to pay for childcare expenses, including daycare, after-school care, and adult daycare.

How FSAs Work

Enrollment: Employees typically enroll in an FSA during open enrollment periods.
Contributions: A predetermined amount is deducted from each paycheck on a pre-tax basis.
Eligible expenses: You can use FSA funds to pay for qualified expenses throughout the year.
Use-or-lose rule: Generally, FSA funds must be used by the end of the plan year, although some plans offer grace periods or carryover options.

Benefits of FSAs

Tax savings: Reduce your taxable income by contributing to an FSA.
Cost savings: Pay for eligible expenses with pre-tax dollars.
Flexibility: Use funds for a variety of healthcare and dependent care expenses.

Important Considerations

Contribution limits: There are annual limits on FSA contributions.
Eligible expenses: Not all medical expenses are eligible for FSA reimbursement.
Use-or-lose rule: Failure to use FSA funds by the end of the plan year may result in forfeiture.