A health flexible spending account (FSA) can be included in the benefits package employers offer to employees. This type of plan allows employees to set aside pre-tax dollars to use for eligible medical expenses. Our agent at Don Lilly Agency in Salem, Virginia, can help you set up an FSA plan for your company.
How Flexible Spending Accounts Work
With flexible spending accounts, an elective portion of the employee’s salary is set aside before taxes. Throughout the plan year, the employee can use the set-aside funds to pay for a variety of health care expenses, including deductibles, copays, and coinsurance. Because the funds are tax-deferred, employees save money on out-of-pocket expenses for medical services and medications.
Why Flexible Spending Accounts Are a Good Idea
FSAs benefit both employers and employees. They are an attractive addition to an employee benefits package to help companies recruit and retain top talent. Employees do not pay taxes on the portion of their salaries set aside for a flexible spending account, and that increases their take-home pay and tax savings.
Employer contributions are tax-deductible when they are paid to an FSA plan participant to reimburse an eligible expense. In addition, as FSA deferrals lower the amount of an employee’s adjusted income, they also reduce the amount of matching employer FICA contributions and federal unemployment tax.
Cost of a Flexible Spending Account Plan
Employers typically pay an annual fee for a flexible spending account plan, plus a monthly charge per employee. The cost to your company can depend on several factors, including your business location and the number of people you employ. An agent at Don Lilly Agency can help you find an FSA plan that is appropriate for your business and the bottom line.