Flexible Spending Arrangements (FSA)

A Flexible Spending Arrangement (FSA) is a type of cafeteria plan authorized under Section 125 of the Internal Revenue Code. Separate accounts can be set up to cover each of the following types of expenses: health insurance premiums (known as a "premium-only plan"), qualified medical expenses, and dependent care expenses. With an FSA, an employee designated amount of pre-tax income is taken from an employee’s paycheck and put into an account to be used for medical expenses throughout the year.

Unlike an HSA, FSAs have a "use it or lose it" provision, meaning that employees must use the dollars in the year in which they are saved or they will lose them at the end of the year. Employers with a cafeteria plan enjoy FICA tax savings while their employees’ contributions are made on a tax-free basis. To learn more about ways to achieve both cost savings and the coverage needed today, contact Chris DeLorey at Telamon today.