This video gives an easy-to-understand explanation for a Flexible Spending Account as it relates to a health plan and its tax implications.
F.S.A. - FLEXIBLE SPENDING ARRANGEMENT
A Health Care Flexible Spending Arrangement (FSA) is an employer sponsored benefit that enables employees to set aside pre-tax dollars out of their paycheck to pay for eligible health care expenses. Monies put into the plan avoid both Federal Income Tax and FICA.
11/11/14 update - The Internal Revenue Service announced the following new benefit plan limits for 2015. In addition, the IRS just issued an important change to Section 125 Cafeteria Plans. We're notifying FSA clients about this change now.
Flexible Spending Account (FSAs) Limits:
Healthcare FSA: The annual maximum for Healthcare FSAs has increased from $2,500 to $2,550 for 2015.
Dependent Care FSA: At this time, the IRS has not released information on contribution limit changes to these plans.
Transit & Parking FSA: Contribution limits remain unchanged for 2015. The monthly limits are $250 for parking, $130 for transit and $20 for bicycle commuting.
F.S.A. definition from Healthcare.gov:
A Flexible Spending Account (also known as a Flexible Spending Arrangement) is a special account you put money into that you use to pay for certain out-of-pocket health care costs.
You don’t have to pay taxes on this money. This means you’ll save an amount equal to the taxes you would have paid on the money you set aside.
You can use funds in your FSA to pay for certain medical and dental expenses, including copayments and deductibles.
FSAs are available only with job-based health plans. Employers may make contributions to your FSA.
You can’t spend FSA funds on insurance premiums.
As always, be sure to consult your CPA and Plan Administrator on the rules for limits, carry-overs, and allowable deductions for every plan year.
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