Flexible Spending Accounts (FSA)
A Flexible Spending Account (FSA), is a tax-advantaged financial account that can be set up through an employer’s cafeteria plan. An FSA allows an employee to set aside a portion of earnings on a pre-tax basis, to pay for qualified expenses as established in the cafeteria plan, most commonly for medical expenses but often for dependent care or other expenses. Money deducted from an employee's pay into an FSA is not subject to federal payroll taxes, therefore resulting in substantial payroll tax savings. There are several different types of flexible Spending Accounts:
Health Flexible Spending Account (FSA)
Employees elect to use pre-tax dollars to reimburse any qualified out of pocket medical and dental expenses not covered by insurance.
Limited Purpose FSA (LPF)
Reimbursements are limited to Vision and Dental Expenses, making participation in this account compatible with contributing to an Health Savings Account (HSA).
Dependent Care Account (DCA)
Employees use pre-tax dollars for reimbursement of qualified expenses for the caring of dependents while they are at work.
Premium Conversion or Premium Only Plans (POP)
Employee contributions for any employer provided group health and dental insurance can be paid with Pre-Tax dollars.