How an FSA Works
Employees set aside pre-tax contributions into a special account. This lowers the employer’s total taxable payroll and payroll-related taxes. It also helps employees reduce their taxable income. They can then use the account to pay for medical or dependent care expenses.
What Expenses Can it Be Used For?
- Copayments and deductibles
- Prescription drugs
- Eye exams
- Eye surgery
- Contact lenses and solutions
- Dental visits
- Orthodontic care
- Chiropractic services
Dependent Care (Adult & Child)
Day care, day camp, before- and after-school care for:
- Dependents under the age of 13
- A disabled spouse or other dependent who is claimed for tax purposes
IRS Publication 502 offers general expense guidelines for a Health Care FSA, which is governed by the rules of Section 125 of the Internal Revenue Code.
IRS Publication 503 offers expense guidelines for a Dependent Care FSA, which is governed by the rules of Sections 125 and 129 of the Internal Revenue Code.
Members may not change their contribution amount or drop out during the plan year unless there is a change in family status.
Unused money in an FSA account at the end of the year cannot be reimbursed to the employee.