Flexible Spending Accounts

Both employers and employees have felt the effects of rising health care costs. Consumers also enjoy having control over health care choices. These trends have led to the offering of flexible benefit plans that allow for tax savings and consumer choice.

A Flexible Spending Account (FSA) is a tax-favored account that allows employees to have a set amount deducted from payroll on a pre-tax basis, saving both the employer and employee FICA taxes of 7.65% of the contributions. The employer may have a reduced unemployment tax liability. The employee reduces his or her federal income tax liability and in most cases state income tax liability.

Health FSA

With a Health FSA, funds can be used to pay for eligible medical expenses not covered under other insurance. Eligible expenses include:

  • Doctor’s office and prescription drug co-pays
  • Medical deductibles and co-insurance
  • Approved over-the-counter items
  • Vision and dental costs
  • Chiropractic services

Dependent Care FSA

Under a Dependent Care FSA, funds can be used to pay for eligible childcare and other dependent expenses. Eligible expenses include:

  • Daycare
  • Nursery school
  • Before and after school care
  • Summer day camp
  • Care for mentally or physically handicapped over age 13