What is a Flexible Spending Account or FSA? 

A FSA is a unique account established by the IRS to help families pay for health care and dependent care expenses.  By enrolling in one or both of these accounts, you can pay for eligible, out of pocket health and dependent care expenses with pre-tax dollars – thus creating a savings for you.  These accounts are convenient, easy to use, and are a great way for your family to save money by reducing your taxable income and increasing your take home pay.  You can participate in your employer’s FSA plan even if you choose not to receive health care coverage through your employer.

There are two separate and distinct types of Flexible Spending Accounts. 

• A Health Care Spending Account will reimburse you with pre-tax dollars for eligible out of pocket health care expenses for yourself and your family members not reimbursed under your health care plan(s) or other insurance program.  Examples of common eligible expenses include:
  • Deductibles and copayments
  • Health care expenses not reimbursed by your health plan
  • Routine physicals, well-baby care
  • Eyeglasses
  • Dental expenditures not covered by insurance or other coverage
  • Non-covered expenses approved by the IRS

(For a detailed list of eligible expenses refer to the Eligible and Ineligible Expenses Section):

• A Dependent Care Spending Account will reimburse you with pre-tax dollars for day-care expenses for your children or qualifying dependents.  Dependents are defined as children under the age of 13 or any other person living with you whom you can claim as a dependent and who is physically or mentally unable to care for themselves.  Dependent care expenses are eligible for reimbursement under a Dependent Care Spending Account if they meet the following requirements (For more information about covered expenses, refer to IRS Publication 503):
  • Expenses must be necessary to enable you to work.
  • A day care center must comply with all state and local laws and provide a tax identification or social security number
  • Payments cannot be made to someone you declare as a dependent

(For a detailed list of eligible expenses refer to the Eligible and Ineligible Expenses Section):

How does a FSA work?

FSAs are an optional benefit offered by your employer.  Each year, if you elect to participate, you will estimate what you expect your family’s total annual eligible Health Care and/or Dependent Care expenses to be. Then you will determine how much of your salary you'd like to set aside in a reserve account that you will use to reimburse yourself for those eligible out of pocket expenses in the future.  There are limits to how much you can set aside and the IRS and your employer establish these limits each year at enrollment time.  Each pay period a portion of your annual election amount will be deducted from your paycheck in equal increments and deposited into the reserve account for your use.  These accounts are for expenses incurred during the plan year only, and you cannot mingle money between plan years or account types.  At the end of each year there is a grace period to submit final claims and collect any money before the account is closed out for the year.   Any money left unused in the account after the grace period will be forfeited based on IRS guidelines.  In order to make the most of your FSA accounts, use the Health Care FSA Budget Worksheet and/or the Dependent Care FSA Budget Worksheet on this site to help you make the best estimate of what you should set aside.