An FSA (Flexible Spending Account) is a health savings account that allows employees to set aside a portion of pre-tax earnings to pay for qualified medical expenses. Learn more about qualified expenses from the IRS.
Your employees can decide how much they’d like to contribute to their FSA during their annual open enrollment. As an employer, you will pre-fund the account and your employees will have pre-tax deductions taken from their paycheck throughout the year, which will go back to you to cover that upfront cost. In 2017, the maximum employee contribution to an FSA is $2,600 per year.
As an employer, you can also elect to have up to $500 of an employee’s funds from the previous plan year roll into the new plan year. This means that, if available, $500 of that employee’s FSA will be rolled over once the plan year has ended.
This article provides general information and shouldn’t be construed as legal, benefits, or HR advice. Benefits and insurance regulations may change over time and may vary by location and employer size. So, please consult a licensed broker or appropriately certified expert for advice specific to your business’s benefits options.