A Flexible Spending Account (FSA), also known as Flexible Spending Arrangement, is one of a number of tax-advantaged financial accounts that can be set up through a cafeteria plan of an employer. A FSA allows an employee to set aside a portion of earnings to pay for qualified expenses (see irs.gov for further information) as established in the cafeteria plan, most commonly for medical expenses but often for dependent care or other expenses. Money deducted from an employee's pay and put into an FSA is not subject to payroll taxes, resulting in payroll tax savings.
If you enroll in a Medical or Dependent Care Flexible Spending Account (FSA), your account(s) becomes effective the first day of the month following your date of hire. FSA funds may only be used for claims incurred on or after your FSA effective date. Contributions are taken out of each paycheck (before taxes) in equal installments throughout the Plan Year (January 1 - December 31). You must re-enroll each year in the Medical and Dependent Care FSA's to continue contributions each Plan Year.
Retirees and Legislators are not eligible to participate in Flexible Spending Accounts.
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