Flexible Spending Accounts (FSA) offer convenient before-tax savings options for employees. If enrolled in a FSA, the employee determines a sum of money to set aside from wages into an account on a pre-tax basis to cover the cost of qualified medical and dependent day care expenses.
Two Account Options
Health Flexible Spending Accounts (Health FSAs) cover unreimbursed healthcare costs like deductibles or copayments.
Dependent Day Care Flexible Spending Accounts (Dependent Day Care FSAs) cover the cost of childcare or elder care to allow an employee to continue working.
Payroll Tax Savings
While FSAs are a great way for employees to save money, employers can also see payroll tax savings added to their bottom lines.
Upon receipt of a valid Health FSA claim request, the entire amount of the participant’s annual election (less any previously reimbursed claims) will be immediately available, regardless of the contributions made by a participant.
Health FSA Card
A Health FSA Card, which eliminates up-front payment, may be available at no cost for employees who elect this option. When a participant has an allowable expense, he or she uses the Health FSA Card and the out-of-pocket portion of the expense will be deducted straight from his or her Health FSA account.
Uniform Coverage Risk
Regulations require the Health FSA to have the full elected amount available to a participant for reimbursement from the first day of the plan year. Because of the potential loss to the employer due to this uniform coverage risk, American Fidelity offers insurance to cover the Health FSA risk. The risk policy “insures” the employer’s uniform coverage risk for the Health FSA, up to $2,550 per participant for shortages in the plan after the coverage period.