A flexible spending account, otherwise known as an FSA, is a way for employees (and employers if they choose) to put money aside specifically to pay for these out-of-pocket medical expenses. This isn’t a typical investment, as the money doesn’t grow, but it can be an effective way of managing money for a specific purpose.
Out-of-pocket medical expenses such as deductibles, copays, prescription drugs, and medical devices.
Employees may use their flexible spending account funds to help pay for the health care costs for themselves, their spouse, their children, and their dependents.
The other big advantage is that money put into the flexible spending account isn’t taxable. This results in a reduction in the payroll taxes paid both by the employing business and the employees. Employees choose how much money to add to their FSA up to a limit set by the employer, and this money is not taxed.
It’s important to note that any contribution from the employer is payable as a lump sum at the start of the year, and will be available to the employees even if the employee leaves the job. The employee pays their contributions to the FSA over the year in regular installments.
Do you think a flexible spending account (FSA) might help your employees cover out-of-pocket medical expenses? If so, contact us to get started.