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A flexible spending account is a monetary employee benefit that may be offered by an employer for a specific purpose. Flexible spending account dollars are in essence a portion of pre-tax employee compensation that can be set aside for eligible use. In order to qualify for a tax free flexible spending account, an employee must meet certain qualifications, such as uncovered medical care or child care expenses, as well as expenses associated with elder care. The terms of a flexible spending account, including a withheld dollar amount, must be predetermined. A flexible spending account bears many similarities to health savings accounts (HSAs). Though unlike a HSA, a flexible spending account is somewhat more limited. Another practical disadvantage of a flexible spending account, is that the term of a flexible spending account is limited to one year, and any unused money is thus squandered at the end of the term. A flexible spending account is a good option for those who have fixed medical expenses and lack health coverage. |
