Flexible Spending Account (FSA)

Flexible Spending Account (FSA)

Flexible Spending Accounts are tax-advantaged savings accounts offered by employers that allow you to use pre-tax dollars to pay for eligible healthcare or dependent care expenses. 

Overview

FSA allow employees to save a pre-determined amount for healthcare related expenses.  Contributions are deducted from each paycheck as pre-tax income on the amount selected during enrollment.  These contributions can be withdrawn to pay for qualified medical expenses.  The contributions are made with pre-tax dollars and funds used for qualifying expenses are withdrawn tax-free.

Types of Flexible Spending Accounts

Health Flexible Spending Account

• Can cover medical, dental or vision expenses that you would otherwise pay for out of pocket.  

Dependent Care Flexible Spending Account

• Can cover employment related expenses for child care up to the age of 14.  A dependent care FSA is compatible with a Health Savings Account. 

Limited Purpose Flexible Spending Account

• Can cover vision and dental care expenses.  A limited purpose FSA is compatible with a Health Savings Account. 

2022 Contribution Limits

Health FSA

• Individuals $2,850
• Families     $5,700

Dependent Care FSA

• Individuals/Families  $5,000

Limited Purpose FSA

• Individual/Families  $2,850

Cons

Typically, a FSA is a use it or lose it plan.  This means if you do not use your contributions they will be forfeited at the end of the year.  Some plans offer a carryover of $570 to the following year. 

Flexible Spending Accounts are tax-advantaged savings vehicles for qualified healthcare and dependent care expenses.  The above describes the general nature of these accounts.  Be sure to consult a professional for a complete understanding and to determine if a FSA is appropriate for you or your family.