Flexible Spending Arrangements (FSA)

Flexible Spending Arrangements (FSA)

A Flexible Spending Arrangement (FSA) is a tax-advantaged financial account that allows employees to set aside pre-tax earnings to pay for eligible out-of-pocket healthcare expenses.

Employers may offer FSAs as part of their benefits package, and contributions to an FSA are deducted from an employee’s gross income, reducing their taxable income. Funds in an FSA can be used for various qualified medical expenses, including copayments, prescriptions, and certain over-the-counter products. However, FSAs typically have a "use-it-or-lose-it" rule, meaning that any unspent funds at the end of the plan year may be forfeited unless the employer allows a short grace period or a limited carryover of funds.