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A flexible spending account (FSA) is often used for governmental agencies
in order to provide their employees with some backup money, should the need
arise.
In this safety net type situation, the employee voluntarily forfeits a portion
of his or her salary to the employer. In return, the employer must make sure
that the premiums are covered for the employee’s portion of health insurance.
In addition, the employer must pay out if a qualified expense is occurred.
If an employee’s FSA is good for $2,000, (that is, about $167.00 a month)
then that amount will be taken out of the pretax paycheck. Now, if the employee
qualifies for all of his or her funds right away, then the employer is required
to pay out. If all the funds are not used up by the year’s end, the employer
can keep the money. The reduction of salaries is almost always advantageous
to the employer. Apart from reducing the employer portion of social security
and Medicare premiums, as well as worker’s compensation and state disability
insurance, the company that provides other benefits such as life, health, dental,
and additional disability can save with FSA’s. Furthermore, the company
is free to use interest earnings and forfeitures at its own discretion.
Flexible Spending Accounts Introduction
A Flexible Spending Account plan is an IRS Section
125 cafeteria plan that allows employees the option
of pre-tax payroll deduction for some insurance premiums,
unreimbursed medical expenses and child/dependent
...
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Flexible Spending Account Forms
A Flexible Spending Account plan is an IRS Section
125 cafeteria plan that allows employees the option
of pre-tax payroll deduction for some insurance premiums,
unreimbursed medical expenses and
How Spending Accounts Work
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