A Flexible Spending Account (FSA) is a special account your employees put money into, that they use to pay for qualified medical expenses not covered by their insurance. Qualifying expenses could include anything from co-payments, prescription drugs, over-the-counter medical supplies and more.
FSAs increase employees take-home pay by reducing their taxable income. Additionally, debit cards are available to easily pay for qualifying medical expenses. Many plans also permit employees to carry over up to $500 each year to avoid losing the funds.
By sponsoring an FSA, the employer can also save on taxes. Employees elect to make pre-tax dollars for medical expenses, thus reducing the employer's share of FUTA and FICA taxes.
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