Healthcare Flexible Spending Account (FSA)

A Healthcare Flexible Spending Account (FSA) is a benefit offered by some employers that allows employees to set aside a portion of their pre-tax earnings to pay for eligible medical expenses not covered by health insurance.

Example #1

For example, if an employee needs to purchase prescription glasses or pay for dental work, they can use funds from their FSA to cover these costs.

Example #2

Another example is using FSA funds to pay for co-pays, deductibles, and other out-of-pocket medical expenses.

Misuse

Misuse of an FSA can occur when employees use the funds for non-qualified expenses, such as cosmetic procedures or over-the-counter medications that are not eligible under the plan. It is important to prevent misuse to ensure the integrity of the FSA system and protect the tax advantages it provides to employees.

Benefits

One of the key benefits of an FSA is that it allows employees to save money on healthcare expenses by using pre-tax dollars. For example, if an employee is in a higher tax bracket, setting aside money in an FSA can result in significant savings on eligible medical costs.

Conclusion

Healthcare Flexible Spending Accounts (FSAs) can be valuable tools for employees to manage and save on healthcare costs. It is important for employees to understand the eligible expenses and rules of their FSA to fully benefit from this employer-provided benefit.

Related Terms

Health InsuranceFlexible Spending Account (FSA)Employee Benefits