FSA

A Medical Flexible Spending Account (FSA) is an employee benefit that allows participants to set aside pre-tax dollars from their paycheck to pay for eligible health care expenses. Because contributions are deducted before taxes, a Medical FSA reduces taxable income and increases overall savings. Employees elect a contribution amount for the plan year, up to the IRS annual limit, and that amount is divided into equal payroll deductions throughout the year. In most cases, the full annual election is available at the start of the plan year.

Medical FSA funds may be used for a wide range of eligible out-of-pocket expenses not covered by insurance, including doctor and specialist copays, prescription medications, dental treatments, orthodontia, vision exams, eyeglasses, contact lenses, and certain over-the-counter medical items, as permitted by IRS guidelines. It is important to plan contributions carefully, as funds generally must be used within the plan year, although some plans may offer a limited carryover or grace period. A Medical FSA is not health insurance but a valuable tool to help manage and budget for anticipated health care costs.