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.
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.