A Flexible Spending Account, or Flexible Spending Arrangement (FSAs), is an account in which employers can deduct pre-tax money directly from the employees paycheck to help them save for qualified healthcare expenses. FSA funds can be used to pay for things like deductible, copays, dental, vision, hearing & prescription drug expenses.
Participating employees could end up saving up to 30% on their costs depending on their individual tax status.
1. HealthCare FSA
Participating employees could end up saving up to 30% on their costs depending on their individual tax status.
1. HealthCare FSA
- A healthcare FSA is a standard FSA that can be used to help cover medical, dental, and vision expenses.
- Healthcare FSAs generally cannot be used in conjunction with an HSA account.
- IRS Contributions for Healthcare FSA
- 2024 - $3,200
- 2025 - $3,300
| Examples of What's Covered | |
| Acupuncture | Alcoholism & Drug Addiction Treatment |
| Ambulance | Bandages |
| Breast Pumps | Care for handicapped |
| Contact Lens & Supplies | Deductibles |
| Dental Co-Pays & Deductibles | Dental services (non-cosmetic) & X-Rays |
| Diabetic Supplies/Insulin | Doctor office visit co-pays |
| Eligible Hospital Charges | Eyeglasses |
| Feminine Hygiene Products | Guide Dog Care |
| Hearing Aid batteries | Holistic Healing Servivces (medically necessary) |
| Lab Fees | Laser Eye Surgery |
| Learning Disabilities Care | Medical Miles (per IRS limits) |
| Oral Surgery | Orthodontia |
| Over-the-Counter Medications | Prescription Drugs & Copays |
| Prostheses | Vision Exams & Glasses |
| Sunscreen (SPF 15 or higher) | Urgent Care Copays |
| Wheelchairs | Emergency Room Copays |
| Examples of What's Not Covered | |
| Birthing Classes | Dental Bleaching or Bonding |
| Diapers/Diaper Service | Cosmetic Procedures & Services that don't have medical coverage |
| Electrolysis | Health Club Dues (Gym Memberships) |
| Hair Removal Products | Marital or Family Counseling |
| Massage Therapy | Food |
| Non-Prescription Vitamins without a prescription | Vitamin Supplements |
| Insurance Premiums | |
| Note: These are examples of eligible and ineligible expenses according to the IRS. This list is not all inclusive | |
2. Limited Purpose FSA
3. Dependent Care FSA
The DC FSA covers daycare expenses for children up to the age of 13, and for elder dependents (like aging parents) that live in your home. It also covers a spouse or dependent that is physically or mentally challenged for whom you claim an exemption. To participate in the DC FSA, you and your spouse must work or attend school full time. Please note that if you’re divorced or separated, the IRS only considers the custodial parent or guardian (the one who has custody 50% of the time) eligible for this account.
- Limited Purpose FSAs can only be used to help cover qualified dental, vision, and preventative care expenses.
- Limited Purpose FSAs are generally used when the employee participates in an HSA.
- IRS Contribution Limit
- 2025 - $3,300
3. Dependent Care FSA
The DC FSA covers daycare expenses for children up to the age of 13, and for elder dependents (like aging parents) that live in your home. It also covers a spouse or dependent that is physically or mentally challenged for whom you claim an exemption. To participate in the DC FSA, you and your spouse must work or attend school full time. Please note that if you’re divorced or separated, the IRS only considers the custodial parent or guardian (the one who has custody 50% of the time) eligible for this account.
- Maximum Contribution. The maximum amount you can contribute per year is: $5,000 for married couples filing jointly and singles. If you’re married and filing separately, you may elect up to $2,500 per year.
- The following must apply to change the amount elected:
- Change in marital status
- Change in number of dependents
- The cost of care has changed
- Employee or spouse has had a change in employment status
- Something happened to cause one of your dependents to either become eligible (i.e. an older child or parent becomes disabled) or cease to be eligible (i.e. a child turns 14)
- Change in residence
- Care must be from a qualified provider with a valid Social Security Number (SSN) or Tax ID.
- May only be used for eligible “employment related” expenses (expenses incurred in order for you and/or your spouse to be employed).
| Examples of Covered DC FSA Expenses | Examples of DC FSA Expenses Not Covered |
| Babysitters | Diapers |
| Day-Care Centers | Educational expenses, including Kindergarten |
| Elder Care | Food, Snacks and Meals |
| Day Camps | Incidental Fees such as Activity Fees, Field Trips |
| Preschool | Overnight Camps |
| After-School Care | Nanny/Au Pair |
| Note: These are examples of eligible and ineligible expenses according to the IRS. This list is not all inclusive. | |
Benefits and Limitations
Benefits:
Benefits:
- Contributions are not subject to tax:
- The funds the employee contribute are deducted from their paycheck and are not subject to employment or federal income tax.
- Employers can contribute:
- Employers can choose to make contributions to the employee's FSA.
- Money can be used on everyday items:
- FSA funds can be used on such items as sunscreen, band aids, counseling, and menstruation feminine care products.
- • Funds typically need to be used by the end of the year: Unused funds in an FSA will generally need to be used by the end of the plan year, or they’re forfeited. However, some employers may offer a 2.5-month grace period to allow you extra time to use the money. Or employers might let you roll over unused funs up to a certain amount. As of 2025, you may be able to roll over a maximum of $660 of unused funds, depending on your plan. But not all employers will offer these options.
- • Accounts aren’t portable: FSAs are tied to your employee benefits so if you leave your job or are terminated, you typically won’t be able to take the money in your FSA with you.
- • Your employer has to offer it: If you’re self-employed or your employer doesn’t offer FSAs, you won’t be able to open one.
SecureOne Compliance
- Election Forms (Annual)
- Plan Documents
- Summary Plan Descriptions
- Amendments
- On-Line Access
- Direct ACH Report
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