A flexible spending account (FSA), also known as a flexible spending arrangement, is one of a number of tax-advantaged financial accounts that can be set up through a cafeteria plan of an employer in the United States.
An FSA allows an employee to set aside a portion of earnings to pay for qualified expenses as established in the cafeteria plan, most commonly for medical expenses but often for dependent care (DCAP) or other expenses.
The biggest benefit of a flexible savings account is that employees can save money from their paychecks for their FSA, without paying taxes on it. Similar to a 401k, they can set a predetermined percentage of their paycheck to go to their flexible savings account, allowing them to accumulate money quickly in an FSA account.
Another common type of flexible spending account is the dependent care FSA, also called DCAP. A dependent care FSA allows you to spend the money from your account on qualified care expenses for your dependents. The most common form of this is paying for child care. However, it can also apply to adult day care as well. Therefore, if the employee takes care of an older relative who is living with them, they can use this account to fund their care. It does not apply to nursing homes, however.
When an employer offers employees the FSA through Benefits Connection, they may do so without worry about the time, effort, and expense of administrating those plans. With our free FSA Administration, HR professionals can continue their work unimpeded by extra tasks and paperwork.
Benefits Connection provides turn-key administration of Flexible Spending Accounts, from the initial planning and implementation, through processing claims, providing monthly reports, and answering questions from both the employer and employee.