A flexible spending account (FSA) is one of the best (and most customizable) options for providing your employees with a cost-effective way to manage their health care costs.
An FSA allows your employees to set aside a portion of earnings to pay for qualified medical expenses as established in their Cafeteria Plan. These accounts are most commonly used to pay for medical expenses, but often dependent care or other monthly expenses can be approved for plan use.
What is a Cafeteria Plan?
A Cafeteria Plan is a reimbursement program, which allows employees to contribute a certain amount of their pre-tax gross income to a designated FSA account for distribution towards certain medical expenses and care for dependents. It’s a way to pay the bills you’re already paying, with pre-tax money.
Is the money contributed to an FSA tax deductible?
Money deducted from an employee’s pay into an FSA is not subject to payroll taxes, resulting in substantial payroll tax savings.
What is the maximum amount of money that someone could contribute annually to a flexible spending account?
For a medical FSA, the maximum annual contribution is set by your company and is something we can work out together. A dependent care FSA has a maximum annual contribution which is set by the IRS.