April 4, 2024

Employers can establish Flexible Spending Accounts (FSAs) for their employees. These accounts allow you to set aside pre-tax dollars to cover qualified medical and dependent care expenses. This translates to significant tax savings, putting more money in your pocket. Here’s a breakdown of FSAs and what you, the average benefit consumer, need to know:

The Three Types of FSAs:

Health FSA (Flexible Spending Account): his is the most common form of FSA. It allows you to contribute pre-tax dollars to cover qualified medical expenses which are not covered by your insurance — like copays, deductibles, prescriptions and over-the-counter medications (check IRS guidelines for details). Important Note: You typically cannot have both a Health FSA and a Health Savings Account (HSA) at the same time.

Dependent Care FSA: this account type helps you pay for dependent care expenses for children under 13. Eligible expenses include daycare, after-school programs, summer camps and even adult daycare for a dependent who cannot care for themselves.

Limited Purpose FSA (LPFSA): This FSA is specifically for dental and vision expenses. Unlike the Health FSA, it’s available only if you’re enrolled in a high-deductible health plan (HDHP) and can be combined with a Health Savings Account (HSA).

The Benefits:

Tax savings is one of the primary benefits of FSAs. Contributions are deducted from your paycheck before taxes, lowering your taxable income. This means you pay less in federal income taxes and, often, state and local taxes as well.

These accounts also help you plan and budget for predictable healthcare costs throughout the year and can “widen your coverage” — you can use these funds for expenses not covered by your primary health insurance plan.

Other Considerations:


Most Health FSAs are “use-it-or-lose-it,” meaning any unused funds at the end of the plan year (or a grace period offered by your employer) are forfeited. Opting for a debit card linked to your account can help ensure you use all the funds.

Election Period: You typically choose your contribution amount during your employer’s open enrollment period. Carefully consider your expected healthcare or dependent care expenses for the year to avoid under-contributing or over-contributing.

Eligibility: FSAs are offered at the employer’s discretion. So, check with your HR department to see if they are available.

Making FSAs Work for You:

There are several key steps to take to maximize the impact of your FSA. First, estimate expenses —review past medical bills for yourself and any dependents to estimate your annual needs.

Second, start small. If these accounts are unfamiliar, you can start with a conservative contribution and adjust in the future.

Finally, review eligible expenses: The IRS provides a comprehensive list of eligible expenses for each FSA type. If you are looking for ways to maximize your benefit, or spend funds before they expire, familiarize yourself with this list.


FSAs can help you keep more money in your pocket. Leverage this benefit to save money on health care for yourself and loved ones. Remember, check with your employer for specific plan details and contribution limits. Have any questions? Click below to reach out.

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