\n Employers may offer a health Flexible Spending Account (FSA) as part of\n their employee benefits programs. The FSA is funded front loaded by the\n employer and the employee’s salary reduction repays the employer for the\n agreed amount. This money can be used to reimburse employees for\n expenses related to medical insurance deductibles and copays,\n out-of-pocket medical treatments or supplies, and dependent healthcare\n expenses.\n
\n\n When employees contribute to a flexible spending arrangement, no\n employment or federal income taxes are deducted from the contribution.\n Any contributions to an FSA by an employer are excluded from the\n employee’s gross income which reduces the tax payments of the employer.\n Both employee and employer save money when using an FSA!\n
\n\n Pre-tax dollars mean you get access to the funds before social security,\n federal and state tax, etc. Say you work 10 hours at $10 ($100) and you\n wanted to set aside $25 for eligible expenses. Instead of getting taxed\n on the full $100, you would only get taxed on the $75 since the $25 was\n taken out before!\n
\n\n Average taxes in the United States are about 20%, if you were taxed on\n the $100 that totals $20 of taxes. If you were taxed on only the $75\n that totals only $15 of taxes. The yearly maximum for an FSA is $3,200.\n If you had a family FSA and made $50,000 annually- you would only be\n taxed $9,450 compared to the full $10,000.\n
\n\n If you did not set funds aside, you would pay an extra $550 of taxes by\n waiting to pay for your share of medical expenses after-tax.\n
\nAll FSAs must meet certain legal requirements:
\n\n Only expenses that are incurred during the plan year can be reimbursed.\n “Incurred” means the date of service or purchase, it is not based on\n when the expenses are paid. For example, an expense is incurred in\n December 2023 when an individual visits the medical practitioner, not\n when the practitioner’s bill is received or paid by the patient in\n January 2024. Only 2023 funds could be used to pay for this visit.\n
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\n If an employee terminated with their employer, they would have access to\n the funds via claims for expenses incurred from the first day of the\n plan year to the date of termination. Card transactions end on the date\n of termination. Payroll contributions end with the former employee’s\n last paycheck.\n
\n\n Employees are not required to have any other insurance to participate.\n Unfortunately, self-employed persons cannot have a Health FSA.\n
\n\n An FSA is allowed under the Internal Revenue Code Section 125 and covers\n all pre-tax dollars for non-reimbursed medical, dental and dependent\n care expenses. Other items that may be covered include insurance\n premiums, deductibles, co-payments, and non-covered services.\n
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\n Not all merchants have their card machine coded properly for the card to\n be approved. Transactions may not be automatically approved upon swiping\n your card at locations such as Target or Wal-greens that sell both\n eligible and ineligible items. Documentation requests may still occur\n for eligible items or services.\n
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