Flexible spending account

Flexible Spending Account (FSA)

Flexible Spending Account (FSA) (pronunciation: /ˈflɛksɪbəl ˈspɛndɪŋ əˈkaʊnt/), also known as a flex plan or reimbursement account, is a type of employee benefit that allows individuals to set aside pre-tax dollars for certain health and dependent care expenses.

Etymology

The term "Flexible Spending Account" is derived from the flexibility it provides to the account holder in terms of managing their healthcare and dependent care expenses. The word "spending" refers to the expenditure of money, while "account" refers to a record or statement of financial expenditure or receipts relating to a particular period or purpose.

Definition

A Flexible Spending Account is a special account funded by an employee's pre-tax salary deduction. The funds in this account can be used to pay for eligible healthcare or dependent care expenses that are not covered by the individual's insurance plan. The primary benefit of an FSA is that it can lower an individual's annual tax liability.

Types of FSA

There are two main types of Flexible Spending Accounts:

Healthcare FSA (Healthcare Flexible Spending Account): This type of FSA is used to pay for eligible medical, dental, and vision care expenses that are not covered by the individual's health insurance plan.

Dependent Care FSA (Dependent Care Flexible Spending Account): This type of FSA is used to pay for eligible dependent care services, such as preschool, summer day camp, before or after school programs, and childcare.

Related Terms

External links

Medical encyclopedia article on Flexible spending account
Wikipedia's article - Flexible spending account

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Flexible spending account