Here are the key features of flexible spending accounts (FSAs) that you should know. They'll help you decide if setting up an FSA is the right decision for your needs.
What is an FSA?
A flexible spending account (FSA) allows eligible employees to set aside pre-tax money via payroll deductions into a tax-free account and use this money to pay for eligible health care expenses. Zenefits offers two types of FSAs:
- Health Care FSAs pay for out-of-pocket health care expenses (e.g., doctor copays, prescriptions, deductible expenses, and other FSA Eligible Expenses) not covered by insurance.
- Child & Elderly Care FSAs pay for the care of a dependent child or adult so that employees can work or look for work (Learn More).
Employees can enroll in one or both types simultaneously in Zenefits. See this page for a comparison of the primary differences between Health Care and Child & Elderly Care FSAs. The only eligibility requirement for FSA is that the employee is offered benefits. They do not have to enroll in benefits, but the company just needs to offer medical benefits to the employee.
Why should I set up an FSA?
FSAs let you set aside some of what you earn each year into an account that's specifically for out-of-pocket health care, child, or elder care expenses, without paying taxes on those dollars. If you have recurring care expenses (e.g., copays, daycare, etc.), or simply a rough estimate of how much you expect to spend on them, an FSA will help you save money.
Learn more about the tax advantages of an individual FSA.
Am I eligible for an FSA?
If your company offers health insurance and you are eligible to enroll in one of their plans, you are eligible to enroll in an FSA. You do not need to be enrolled in health insurance through your company, you simply need to be eligible to be offered insurance. Though there are exceptions, self-employed employees and shareholders who own 2% or more in an S-Corp, LLC, LLP, PC, sole proprietorship, or partnerships are generally ineligible for FSAs.
If you already have a health savings account (HSA), or intend to sign up for one, you can only enroll in a Child & Elderly Care FSA. You may not be enrolled in an HSA and a Health Care FSA at the same time.
How much does an FSA cost?
As an employee, the only cost to you is the amount you contribute to your FSA. Your company will pay all setup and account fees.