FSA's, flexible spending accounts, are designed to help employees pay for medical expenses with pre-tax dollars. Your employer sets up the plan and withholds a designated amount of money from your salary to fund the account. No taxes are withheld on contributions to the account. Your employer may or may not contribute to your plan.
Qualified Expenses
You may take tax-free reimbursements from your FSA to cover costs such as medical co-pays and dental bills. Non-prescription medications also qualify for payment from your FSA.
Employer Contributions
Employers may contribute either a percentage of an employee's salary or a predetermined dollar amount to an employee's FSA.
Proof of Medical Costs
To receive reimbursement from an FSA, employees must produce written documentation that they paid for qualified medical expenses.
Non-Qualified Expenses
The cost of health insurance premiums and long-term care do not qualify for reimbursement from a flexible spending account.
Distributions
You must use or lose the money in your FSA during a plan year. Balances may not be carried over to the following year.
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