FLEXIBLE SPENDING ACCOUNTS

A Flexible Spending Account (FSA) is a benefit both the Employee and the Employer.

FSA benefits allow employees to set aside tax-free dollars for use throughout the year on qualified expenses, reducing out-of-pocket costs.

The cost to you as an employer is relatively minimal and often offset by the tax savings an employer receives since the employee payroll deductions are taken pre-tax. This means that you, the employer, is not paying the FICA tax portion for funds placed in a FSA.

There are 3 different types of FSA benefits that can be offered to employees: Health Care, Dependent Care and Commuter.

With a Healthcare FSA, the account holders has access to the entire annual amount elected beginning on the very first day of the plan year for medical, dental, and vision costs.

The employee elects an annual amount, which is available to use at the start of the plan year and is taken as pre-tax payroll deductions throughout the plan year. 

Healthcare FSA funds can be used for:

  • Prescription Medicines
  • Doctor’s Co-Payments and Deductibles
  • Prescription Eyeglasses or Contact Lenses
  • Over-The-Counter Medicines and Health Products
  • Dental/Vision Expenses
  • Medical Diagnostic Products
  • Home Health Care Items

For more on Healthcare Flexible Spending Accounts, click here for a link to our Partner, Navia Benefits.

A Dependent Care FSA covers expenses for qualifying dependents, even if they are not currently covered under the employer-sponsored health insurance plan.   

A Dependent Care FSA (DCFSA) is a pre-tax benefit account used to pay for eligible dependent care services, such as preschool, summer day camp, before or after school programs, and child or adult daycare.  

For a full list of qualified expenses please visit IRS Publication 503.

Qualifying dependents include:

  • Spouse
  • Qualifying Child
  • Qualifying Relative

For more on Dependent Care FSAs, click here for a list of Q&As from our Partner,  WageWorks by HealthEquity

A Commuter FSA gives employees the ability to use pre-tax dollars for work-related commuting and parking expenses.

How Does a Commuter FSA Work?

A commuter benefits account, set up under a Flexible Spending Account (FSA) is an employer-sponsored benefit program that allows employees to set aside pre-tax funds for mass transit and parking expenses associated with a commute to work. 

Further details from the IRS click here.

What Expenses Are Considered Eligible?

Mass Transit Expenses
Items that include transit passes for buses, trains or subways, tokens, fare cards, vouchers, or similar items specifically related to a mass transit commute to or from work.

Parking Expenses
Parking expenses incurred at or near the employee work location or a location from which the employee continues to commute to work by car pool, van- pool or mass transit. Out-of-pocket parking fees for parking meters, garages and lots qualify.

Van-Pooling Expenses
Van-pooling requires a commuter highway vehicle with a seating capacity of at least 7 adults, including the driver. At least 80 percent of the vehicle mileage must be for transporting employees between their homes and workplace with employees occupying at least one-half of the vehicle’s seats (not including the driver’s seat).

More on Commuter FSA Benefits, click here for a link to our Partner, PayFlex

If you have questions about FSAs or would like to incorporate one
into your Benfits Package, talk to us.