What is a flexible spending account (FSA)?

A flexible spending account (FSA), also called a flexible spending arrangement, is an account set up by your employer, with deposits made directly from your salary before your income has been taxed. If you have a health FSA, you can use the funds in your FSA to pay for certain eligible medical expenses that are not covered by your health insurance plan, and because those funds are not subject to taxes, you can save money. Typically funds in a health FSA can be used to pay for copayments, deductibles, some medications, vision and dental services, and other medical expenses.

If your employer offers a dependent care FSA, you may be able to use those pre-tax funds to pay for childcare, eldercare or the cost of care for other dependents.  Another type of FSA is intended to pay expenses related to adoption.

FSAs can provide a money-saving safety net; you contribute money to the account tax-free throughout the year and those funds are available if you need them. The Internal Revenue Service requires that the funds in FSAs be used by the end of the plan year or forfeited. Some plans offer a grace period (no more than 2 1/2 months), or a set amount (up to $500) that can be rolled over to the next plan year. Make sure you understand the specific details of your FSA plan offering before you enroll in the FSA. 

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Important: This content reflects information from various individuals and organizations and may offer alternative or opposing points of view. It should not be used for medical advice, diagnosis or treatment. As always, you should consult with your healthcare provider about your specific health needs.