A Benefits Today Flex Spending Account (FSA) allows employees to increase their take-home pay by setting aside pre-tax dollars to pay for qualified medical and dependent care expenses. As an employer, you will take advantage of reduced payroll tax on all dollars set aside in an employee’s flex account, which typically more than covers the cost of administering the plan. Below are the different types of FSAs to choose from:
Medical FSA - covers an extensive list of eligible, reimbursable medical expenses as defined by IRS Code Section 213(d), and the funds are available at any time during the plan year.
Dependent Care FSA (DCA) - gives your employees the opportunity to pay for work-related dependent care expenses with pre-tax dollars. In fact, DCA’s may provide your employees more tax advantages than the federal income tax credit.
Limited-Purpose FSA – while it doesn’t cover medical expenses, it is designed to complement the Health Savings Account (HSA) when paired with a qualified high deductible health plan, and may be established to pay for eligible vision and dental expenses.
Do you have employees that are worried about the “use it or lose it” aspect of a Flex Spending Account? Well, we’ve got you covered with two options to reduce the risk of an employee forfeiting unspent FSA funds.
1) A Rollover option allows employees to carryover up to $500 in unspent FSA medical expense funds.
2) An alternative Grace Period option allows employees up to 2 months and 15 days beyond the end of the plan year to use their contributed funds, permitting employees to incur expenses and submit claims using the previous year’s FSA balance.