Medical Flexible Spending Account

What It Is

A Medical Flexible Spending Account (Medical FSA) allows employees to put aside money pre-tax to use to reimburse themselves for eligible health care expenses for themselves and/or covered dependents. In order to participate, an employee must elect the annual amount they want to contribute to their medical FSA, up to $2,600 (for 2017, as determined by IRS Code section 125(i)), prior to the start of their employer’s benefit plan year. Each employer determines the maximum amount an employee may contribute to their Medical FSA during a benefit plan year, so they may offer a lower annual maximum amount.

Wondering what qualifies as an “eligible expense”? Click below for a list of eligible FSA items.

How It Works

Throughout the course of the benefit plan year, a portion of an employee’s annual election amount will be deducted pre-tax from each paycheck to fund the account, until the annual election amount is reached. Even though employees’ accounts are funded through payroll deductions, all Medical FSAs are pre-funded by the employer, which allows employees to use the full amount of their election at any point during the year. The full amount of each employee’s annual election will be deducted pre-tax, thus lowering an employee’s taxable income and maximizing tax savings.

Use the tax calculator below to see how much you could be saving by participating in a Medical FSA!