FSA (Flexible Spending Account)

  • Established by an employer and may be used in conjunction with any type of health plan but no health plan is required.

  • Generally funded by pre-tax payroll deductions by employer but employers may also contribute. FSA's allow employees to put away savings for medical expenses before taxes, reducing their overall taxable income.

  • FSA funds can be used to cover deductibles, copays and coinsurance, as well as qualified medical expenses that are not covered by health insurance, such as LASIK eye surgery. FSA funds may only be used for Over the Counter Medications only if a doctor has prescribed them. They may not be used for health premiums.

  • Money must be used by the end of the calendar year. If not used by the end of the year (employers may allow a grace period to March 15th of the following year) the money is forfeited. Employers may choose to allow employees to carry over up to $500 instead of allowing funds to be used by the March 15 grace period. Note: thee options are either or, employers cannot offer both.

  • Employers were allowed to set their own FSA contribution limits for their employees. However, the ACA limits contributions to no more than $2,650 in 2018. 

  • Contributions are deducted from each paycheck throughout the year.  However, the full annual contribution amount is available after the first contribution is made. If the employee uses the full amount and then is terminated or quits before the end of the year, the FSA funds are not required to be reimbursed to the employer.