An FSA (Flexible Spending Account) 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.
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Your employees can decide how much they’d like to contribute to their FSA during their annual open enrollment periods.
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 2019, the maximum employee contribution to an FSA is $2,700 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.