HR Q&A -What Is a Flexible Spending Account (FSA)?

A Flexible Spending Account is a special type of savings account you can set up through your employer (if they offer it). It allows you to set aside pre-tax dollars from your paycheck to use on eligible out-of-pocket medical, dental, vision, and even dependent care expenses. The “pre-tax” part is key—it means the money you contribute isn’t taxed, which can save you a good chunk of change annually. For employers, there are tax benefits too…Contact us here if you’d like to know how we can help you with that.

Here’s the deal, though—FSAs come with a “use it or lose it” rule. Most of the funds you set aside need to be spent within the year, though some employers offer a grace period or allow you to roll over a small amount.

Benefits of an FSA

Tax Savings: Since contributions reduce your taxable income, FSAs can lower your overall tax bill.
Budgeting Tool: An FSA helps you set money aside proactively for healthcare or dependent care expenses.
Convenience: Most FSAs include a debit card for eligible purchases, making it super easy to use the funds.

Common Eligible Expenses

You can use an FSA for a wide range of healthcare costs, including but not limited to:

Copays and deductibles
Prescription medications
Over-the-counter meds (with some restrictions)
Eyeglasses, contact lenses, and eye exams
Dental work, including braces and cleanings
Certain dependent care costs, like daycare or after-school programs (if it’s a Dependent Care FSA).

Is an FSA Right for You?

FSAs are especially beneficial if you anticipate medical or dependent care expenses in the upcoming year. However, careful planning is crucial—contributing too much could lead to unused funds. With its tax advantages and flexibility, an FSA can be a valuable tool to offset everyday healthcare and childcare costs. If your workplace offers one during open enrollment, consider taking advantage and giving your budget the boost it deserves!

This blog does not constitute formal HR or legal advice and does not address state or local law. Our HR Resource Center by Mineral offers further advice on this and many other topics. For a small additional fee you can also speak to a live HR Specialist. Contact your friendly APlus Payroll CSS for further information (including login details) or login here. Wanting to know how we can help your Payroll process? Please contact us here. Advice is always free!