Health Plans
What is FSA (Flexible Spending Account)?
Definition
An FSA is an employer-sponsored account funded with pre-tax salary deferrals to pay for eligible medical or dependent-care expenses. Unlike an HSA, an FSA is generally use-it-or-lose-it — unused funds forfeit at year-end, subject to limited carryover or grace-period rules.
Real-World Example
An employee elects $3,300 into a health FSA in January to cover braces for her son. She reimburses the orthodontist tax-free and saves roughly $900 in combined federal and payroll tax.
Why It Matters
FSAs remain a top way to reduce taxable income when you know your predictable medical spend. Missing the December deadline, however, is a common and costly mistake.
Frequently Asked Questions
Can I have both an FSA and an HSA?
Only if the FSA is limited-purpose (dental and vision only). A general-purpose FSA disqualifies you from HSA contributions.