Flexible Spending Accounts

If you are offering an employer-provided health care plan to your employees you can establish a medical Flexible Spending Account to help your employees pay for unreimbursed medical expenses. An FSA allows employees to pay for many medical and dependent care expenses with “pre-tax” dollars.

When your organization establishes a Flexible Spending Account (FSA), employees can elect to have a set amount withheld from each paycheck. As they incur eligible expenses, they submit documentation to you and are reimbursed from those untaxed funds. Money withheld from each paycheck is not reported as taxable income for federal income tax or Social Security/Medicare tax. In most states, FSA contributions are not reported for state income tax purposes.

You may offer two types of FSA:

  • A dependent care FSA is used only for eligible dependent care expenses.
  • A health care FSA is used only for eligible medical expenses. If your organization offers a health care plan, this is a way to help employees with those medical expenses that are not reimbursed.

Employees cannot transfer money from one FSA to the other. In 2017, the maximum contribution to a health care FSA was $2,600 and $5,000 to a dependent care FSA.

If you want to offer an FSA, MMBB can provide support:

  • Our free FSA kit helps you set up FSA accounts, communicate the plans to staff and enroll employees. It also includes templates for forms that employees can use when requesting reimbursement through your plan.
  • Two calculators on the MMBB website within the financial planning section can help your employees decide how much to put into each type of FSA in order to minimize the risk of forfeiting funds.

For more information, visit www.mmbb.org and search “FSA,” or call MMBB at 800.986.6222.