Flexible Spending Account

A Flexible Spending Account (FSA) allows an employee to set aside a portion of his or her earnings to pay for qualified expenses. The money deducted from the employee's pay is not subject to payroll taxes which results in a tax savings benefit for the employee. FSAs are typically used for medical expenses however they can also be used for dependent care expenses.

An important item to remember when determining your FSA contribution amount for the year is that you must use the entire amount during the plan year or you will forfeit the unused dollars. It has been estimated that more than five million employees and their families participate in FSA plans. These five million employees are forfeiting around $1 billion per year in unspent FSA dollars.

If your employment is terminated during the plan year your active participation in the FSA will also end and you will not be able to make additional contributions. Even though you can not make additional contributions you can submit qualified expenses incurred before your termination date up to the annual election amount you designated. This means you can be reimbursed more than you actually contributed during the plan year. Expenses for services rendered after your termination date are not eligible for reimbursement.