Flexible Spending Accounts (FSAs) are powerful, tax-advantaged tools that help employers deliver more value through their benefits programs while reducing payroll taxes. They allow employees to set aside pre-tax dollars for eligible medical and dependent care expenses, which lowers their taxable income and boosts financial wellness.
For employers, FSAs support recruitment, retention, and compliance goals, especially when paired with other benefits like Health Savings Accounts (HSAs) or High-Deductible Health Plans (HDHPs). But offering FSAs comes with regulatory responsibilitiesโincluding the need for a written plan document under Section 125 of the Internal Revenue Code.
This guide explains what FSAs are, how they benefit both employers and employees, and how to implement and manage them correctly.
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