A flexible spending account is a form of savings account that offers special tax benefits to the account holder. An FSA, often known as a flexible spending arrangement, is a type of account that may be set up by a business for its workers. You can donate a percentage of your normal wages to the account, and companies can likewise contribute to workers’ accounts. Distributions from the account must be utilized to compensate the employee for reasonable medical and dental expenditures.
There is no one-size-fits-all amount that is appropriate for everyone, and FSA elections vary depending on a person’s unique circumstances. Examine your estimated out-of-pocket healthcare costs for the future year before making your decision.
While both Flexible Spending Accounts and Health Savings Accounts enable employees to set away money from their paychecks for medical bills, the ways they function and the procedures to set them up are vastly different. If your company provides one or both of these accounts, you’ll need to educate your staff on the differences between the two and make it clear which ones you offer.