Flexible Spending Account (FSA)

Flexible Spending Account (FSA)

A Flexible Spending Account (FSA) is a tax-advantaged financial account that allows employees to set aside pre-tax dollars to pay for eligible healthcare expenses not covered by insurance. Contributions to an FSA are made through salary reduction agreements, which lower the employee’s taxable income.

FSAs can be used for a variety of qualified medical expenses, including copayments, deductibles, prescription medications, and certain over-the-counter items. However, FSAs are subject to a "use-it-or-lose-it" rule, meaning that any unspent funds at the end of the plan year are forfeited, although some plans may offer a grace period or allow a small amount to be carried over to the next year.