What is an FSA and Will It Benefit You?

Understanding FSA Plans

A Flexible Spending Account (FSA) is an employer-established, tax-advantaged account funded by the employee.

Flexible Spending Accounts (FSAs) have always been a great way for employees to budget for out-of-pocket healthcare expenses.

This account does not earn interest and it won’t reduce health insurance premiums, but it can reduce the out-of-pocket health care expenses of the account holder and lower an employees’ taxable income.

In addition to standard expenses such as doctor visits and prescription drugs, FSA funds can be used for many over-the-counter items including first aid kits, blood pressure monitors and home medical aids. The IRS sets the guidelines for FSA product eligibility and individual FSA plans have the final determination of which expenses are covered by their FSA programs.

FSA's are available only with job-based health plans. Employers may make contributions to your FSA, but are not required.

You can’t spend FSA funds on insurance premiums.

As always, be sure to consult your CPA and Plan Administrator on the rules for limits, carry-overs, and allowable deductions for every plan year.

To Summarize

Employer establishes. Employee funds.

An FSA is an employer sponsored benefit that enables employees to set aside pre-tax dollars out of their paycheck to pay for eligible health care expenses. Monies put into the plan avoid both Federal Income Tax and FICA.

So Which is Best for YOUR Family or Business?

Determining which of these tax advantaged accounts is right for you (if any) depends on your budget and medical needs.  Contact your local San Diego Insurance Agent today and make sure you're maximizing your plan and benefits.