Flexible Spending Accounts (FSAs)
- What is an FSA and how does it work?
- An FSA is an employer-sponsored spending account that allows employees to set aside pretax earnings to pay for eligible health care or dependent care expenses. Pretax funds are deducted from each paycheck and automatically deposited into an FSA account. Employees decide how much to contribute, tax-free, for the year.
- What are the benefits of an FSA to employees?
- Pretax contributions lower taxable income, and reimbursements are made tax-free from the employee’s account. In addition, an employee has access to the entire elected amount on the first day of the plan year.
- How do employers save money?
- FSA programs can lower employers’ FICA taxes on employee payroll and possibly what is paid for other benefits plans, such as workers’ compensation and disability, that are based on employees’ taxable income.
- How is an FSA funded?
- Employees make pretax contributions through automatic payroll deductions. Employers can also decide to contribute, up to a maximum amount.
- What is the main difference between an FSA and an HSA?
- With both an HSA and a FSA, account holders make tax-deductible contributions. HSAs are individually owned while FSAs are owned by the employer.
You keep your HSA balance until you spend it and the account belongs to you even if you switch employers or retire. With an FSA, any money in the account at the end of the plan year is forfeited to your employer.
Anyone can contribute to your HSA account. An FSA must be funded exclusively through employer contributions or employee pre-tax contributions.
- Is a debit card available?
Yes. A Visa® debit card is available for eligible medical expenses, and can be used at the point of purchase or after care.
This card is issued by the Bancorp Bank, pursuant to a license from Visa U.S.A. Inc. and can be used for qualified expenses wherever Visa debit cards are accepted.
- What happens to FSA funds at the end of the year?
- Unused money in an FSA is handled in one of three ways, based on the plan design for the group:
- Forfeited at the end of the plan year
- Rollover of up to $500 of the balance to the next plan year. Remaining balances are then forfeited.
- Grace Period allows expenses in the first few months of a new plan year to be paid with old plan year funds. Remaining balances are then forfeited.