An FSA is an employer-sponsored arrangement under the tax-advantaged cafeteria plan rules, created to cover medical expenses as defined under Section 213(d) of the Internal Revenue Code. While contributions to the FSA can be made by the employer or employee, they are typically made by the employee. Employees pay no federal, Social Security or (in most states) state taxes on FSA contributions. There is no IRS limit on annual FSA contributions, but most employers cap contributions at $5,000. FSA funds are subject to a "use it or lose it" provision, and must be used in the year in which they are accrued. Unused funds revert to the employer. Funds are not portable, and do not accrue interest.
Two accounts, the health care FSA and the dependent day care FSA, which allow employees to pay certain health and dependent day care expenses with before-tax dollars.
Many flexible benefit programs include flexible spending accounts, which give employees a choice between taxable cash and nontaxable compensation in the form of payment or reimbursement of eligible, tax-favored welfare benefits. FSAs can be funded through salary reduction, employer contributions or a combination of both. Employees can purchase additional benefits, pay health insurance deductibles and co-payments, or pay for child care benefits with the money in their FSAs.
Employee-owned accounts used to pay for medical and/or dependent care throughout the year. Contributions to FSAs reduce employees' taxable income, however, any amount that remains in the account at year-end is forfeited; employees must "use it or lose it."
Special accounts authorized under Section 125 of the Internal Revenue Code and typically funded by an employee's salary reduction to help pay certain expenses not covered by the employer's plan or insurance contract. Because FSA deposits escape federal income taxes, participants can pay for medical care with pretax dollars, but they forfeit any unused funds at the end of each calendar year.
Variation of flexible benefits under which employees may set aside money on a pre-tax basis through salary reduction to pay for dependent care and certain medical expenses, including insurance premiums. The employer sets a maximum contribution amount at the beginning of each plan year, and participants may elect to contribute an amount each plan year up to that maximum.
They are also known as "cafeteria" or "125" plans, for Section 125 of the IRS tax code. FSAs allow workers to fund an account through salary reduction and withdraw the funds, as needed, for medical expenses. Any unspent funds left in an FSA at the end of each year are forfeited so it is important to carefully estimate the amount of money needed.
FSA's cover dependent savings accounts and health care spending accounts. They must be segregated per IRS regulations. These employer-sponsored programs allow employees to designate part of their earned income to these special accounts for the purpose of using the money to pay for qualified dependent care (includes incapacitated senior citizens) and qualified medical expenses (eligible for reimbursement under FSA, but not reimbursed by medical insurance).
Administered by PayFlex Systems. A means of sheltering certain medical care and day care expenses from taxes. Employees must enroll in the accounts each Annual Enrollment.
Variation of flexible benefits under which employees may set aside money on a pre-tax basis via salary reduction to pay for certain and dependent care. Two types of spending accounts are permitted under the tax code: health care and dependent care. The employer sets a maximum contribution amount at the beginning of each plan year, and participants may elect to contribute an amount each plan year up to that maximum.
FSAâ€(tm)s provide employees with the opportunity to save money on a pre-tax basis and reduce their taxable income up to permitted IRS limits to save for related expenses. AACPS provides a Dependent Care Account and Healthcare Spending Account option to employees. Careful planning is required for funding the FSA because there is a use or lose concept if funds are not requested by the annual deadline.
Special accounts typically funded by an employee's salary reduction to help pay for certain expenses not covered by the employer's plan or insurance contract. The advantage of these accounts is that after-tax dollars are converted to before-tax dollars, thereby reducing the actual cost of expenses. A Section 125 cafeteria plan is a flexible spending account.
Administered by PayFlex Systems. Allows participants to pay for eligible medical and day care expenses with funds deducted from their paychecks on a pre-tax basis. More information is available at www.utflex.com.
