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Flexible Spending Accounts (FSAs) are employer-sponsored benefit plans that allow employees to set aside pre-tax dollars for healthcare expenses. Understanding the common questions about FSAs can help you maximize their benefits and avoid pitfalls.
What Is an FSA?
An FSA is a financial account that employees can use to pay for eligible medical, dental, and vision expenses. Contributions are made through payroll deductions before taxes are applied, reducing taxable income.
Key Features of FSAs
FSAs typically have an annual contribution limit set by the IRS. Funds are available at the start of the plan year, and unused money may be forfeited unless your employer offers a grace period or rollover option.
Common Questions
- Can I change my FSA contributions during the year? Yes, but only if you experience a qualifying life event or during open enrollment.
- What expenses are eligible? Medical copays, prescriptions, dental work, vision care, and certain over-the-counter items.
- What happens to unused funds? Typically, unused money is forfeited unless your plan allows rollover or a grace period.
- Are FSA funds taxable? No, contributions and reimbursements are tax-free.