Flexible Spending Account (FSA)

A Flexible Spending Account (FSA) is an employee-owned account that uses pre-tax dollars to pay for out-of-pocket medical, dental, vision, and dependent expenses for employees and their family members. An FSA program generates tax savings for both employers and employees.

 

NEW for 2014 the Department of Treasury announced a major policy change that will impact Flexible Spending Account (FSA) plans. In what is being hailed as a hugely positive development for administrators, employers, and FSA participants, the Treasury has modified the “use it or lose it” provision to allow for a limited rollover of FSA funds. 
Effective for the 2014 plan year, employers will have the option to allow FSA plan participants to roll over up to $500 of unused funds at the end of the plan year.  Effective immediately, employers with an FSA plan that does not include a grace period will have the option to allow current FSA plan participants to roll over up to $500 of unused funds at the end of the 2013 plan year.

 

Medical – Flexible Spending Account:

Medical FSA plans reduce medical benefit cost for both employers and employees. As tax rates go up, savings increase.

Examples of What’s Covered Under A Medical Savings Account:

  • Deductibles & Co-Insurance Payments for Both Medical and Dental
  • Office Visit, Emergency Room, & Hospital Co-Payments
  • Birth Control Pills
  • Chiropractic Care
  • Acupuncture
  • Educational Aids For Handicapped Individuals
  • Eye Exams, Glasses, Contact Lenses, & Solution
  • Lasik Eye Surgery
  • Hearing Aids and Batteries
  • Infertility Treatment
  • Orthodontia
  • Orthopedic Shoes
  • Physical Therapy
  • Prescription Drugs & Co-Pays
  • Psychiatric/Psychologist/Social Worker Counseling


Example: John is married, earning $40,000.00 per year, with two children and has $1,000.00 of out-of-pocket medical expenses.

Without an FSA With an FSA
Annual Salary $40,000.00 $40,000.00
Pre-tax deferral -$0 – $1,000
Taxable Income $40,000 $39,000
Taxes* -$14,000 -$13,904
Medical Expenses -$1,000 -$0
Take Home Pay $24,740 $25,096
Annual Savings  $356
John’s Net Cost   $644
*Includes FIT and FICA taxes. NJ residents are required to pay state income tax on gross pay.
Dependent – Flexible Spending Account:
Dependent FSA Accounts reduce dependent care cost for both employers and employees. As tax rates go up, savings increase.
A Flexible Spending Account (FSA) is an employee-owned account that uses pre-tax dollars to pay for out-of-pocket medical, dental, vision and dependent expenses for employees and their family members. An FSA program generates tax savings for both employers and employees.
Medical – Flexible Spending Account:
Medical FSA plans reduce medical benefit cost for both employers and employees. As tax rates go up, savings increase.
Examples of What’s Covered Under A Medical Savings Account:
  • Deductibles & Co-Insurance Payments for Both Medical and Dental
  • Office Visit, Emergency Room & Hospital Co-Payments
  • Birth Control Pills
  • Chiropractic Care
  • Acupuncture
  • Educational Aids For Handicapped Individuals
  • Eye Exams, Glasses, Contact Lenses & Solution
  • Lasik Eye Surgery
  • Hearing Aids and Batteries
  • Infertility Treatment
  • Orthodontia
  • Orthopedic Shoes
  • Physical Therapy
  • Prescription Drugs & Co-Pays
  • Psychiatric/Phychologist/Social Worker Counseling


Example: John is married, earning $40,000.00 per year, with two children and has $1,000.00 of out-of-pocket medical expenses.

Without an FSA With an FSA
Annual Salary $40,000.00 $40,000.00
Pre-tax deferral -$0 – $1,000
Taxable Income $40,000 $39,000
Taxes* -$14,000 -$13,904
Medical Expenses -$1,000 -$0
Take Home Pay $24,740 $25,096
Annual Savings – $356
John’s Net Cost  – $644
*Includes FIT and FICA taxes. NJ residents are required to pay state income tax on gross pay.
Dependent – Flexible Spending Account:
Dependent FSA Accounts reduce dependent care cost for both employers and employees. As tax rates go up, savings increase.