FSAs (Flexible Spending Accounts) – What Are They and What Are Their Benefits?

Sharing is caring!

What are FSAs?

FSA accounts are a type of investment are used to help pay for healthcare-based expenses, similar to HSAs. Unlike HSAs, they are employer-sponsored plans meaning you can’t open one on your own. In that way, they are more comparable to 401ks, which are also employer-sponsored accounts. The equivalent to the IRA would be HSAs or health savings accounts since you open each of those all on your own and they remain with you without needing to bother with transferring money from employer to employer.

Also unlike HSAs, the contributions to this account do not completely roll over from year to year. FSA accounts may offer the option for a grace period or rollovers on money that can be kept in the account but you can only do one or the other. FSAs with a grace period offer up to 2 1/2 months for what’s left in the account to be used on medical expenses. For carryovers, there is a limit to the amount of money that can be carried over year-to-year.

What are the benefits of FSAs?

The contributions you make to flexible spending account are deductible from your federal and employment taxes. The contributions made by your employer to an FSA account are included in your gross income.

Like HSAs, you don’t pay any taxes on withdrawals/reimbursements from FSAs as long as it’s for an eligible medical expense. One nice thing about flexible spending accounts is that you can use them to pay for medical expenses even if you haven’t placed the necessary funds into the account yet.

Employers looking to start using FSA accounts for their employees might refer to are payflex.com and wageworks.com as a good place to learn more about them and open the accounts.

Disclaimer: I am not any sort of investment or financial professional giving any sort of legal advice. I’m just some guy trying to teach other people about how they might navigate the financial world.

Sharing is caring!