There’s no denying how important employee benefits are today for employees, potential employees, and employers. Because of this, it’s critical for workers and companies to keep up with the latest benefit trends and, as an employee, make the most of all of the benefits that are available to you.
One benefit in particular stands to help employees save money, and it is also one that is often under-utilized by today’s workforce – flexible spending accounts (FSA).
Not to be confused with a health savings account (HSA), a flexible spending account can provide a few benefits to employees that many seem to be unware of. Let’s take a closer look as FSA’s and how they can be beneficial to employees and their families.
WHAT IS A FLEXIBLE SPENDING ACCOUNT AND WHO CAN PARTICIPATE IN THEM?
Sometimes called a flex plan or reimbursement account, a Flexible Spending Account (FSA) is an IRS-approved account offered to you by your employer that allows you to use tax-free dollars to pay for certain medical and/or dependent care expenses.
There are two types of FSAs: A Medical FSA (for eligible medical services provided to you, your spouse or your dependent) and a Dependent Care FSA (for eligible dependent care expenses).
In order to participate in an FSA, employees need to meet the eligibility requirements set by their employer. These should be clearly outlined in the benefits documents provided to you.
HOW DO EMPLOYEES BENEFIT FROM SETTING UP AND PARTICIPATING IN AN FSA?
Flexible spending accounts allow employees to contribute pre-tax dollars into an account set-up by their employer and can later withdraw these funds tax-free to pay for qualifying health related fees or dependent care expenses.
By contributing to an FSA, employees increase their take-home pay by reducing taxable income, making these out-of-pocket expenses more affordable. When you enroll in your employer sponsored flexible spending account, your contributions are not subject to Federal, FICA and most state taxes. This means you bring home more money in your paycheck.
One important thing to keep in mind with FSAs is that the unused funds in the account are forfeited at the end of the timeframe set by each employer’s plan. Many employees shy away from enrolling in an FSA for this very reason.
However, the IRS introduced new rules allowing either a rollover of a portion of FSA funds or an extended grace period for using the money. By planning out and allocating the right amount, there is little risk of losing your funds (and a lot to gain!).
And, if you do have funds leftover at the end of the year (or term), you may be surprised to learn what you can use those dollars on!
DON’T MISS OUT ON SAVING MONEY IN 2018. LOOK INTO FLEXIBLE SPENDING ACCOUNTS
While not every employee is a good fit for a flexible spending account, many can actually benefit from participating in them. This is why more and more employees have signed up for them in recent years.
Despite this, some employees don’t sign up for FSAs because either they are unaware they are available through their employer, or they aren’t sure how they work.
For employees who think a flexible spending account could be right for them and their family, considering a FSA can be beneficial. And with time still left in 2017, it isn’t necessarily too late to sign up for a flexible spending account for 2018!
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