Personal Finance Essentials
Flexible Spending Accounts
Health Insurance > Flexible Spending Accounts
A Flexible Spending Account – or FSA – is an employer-sponsored account that lets employees set aside money on a pre-tax basis to pay for eligible healthcare expenses.
Like an HSA, an FSA reduces your taxable income by the amount you contribute. Unlike an HSA, it doesn’t require enrollment in a high-deductible health plan.
How an FSA Works
Contributions are deducted from your paycheck before taxes are calculated, which effectively lowers the cost of your eligible medical expenses. Qualified expenses typically include copayments, prescription medications, dental care and vision care, among others.
One key difference between an FSA and an HSA: the full annual FSA contribution amount is available to you on day one of the plan year, even if you haven’t yet contributed that much. With an HSA, you can only spend what you’ve actually deposited.
If you have access to both an HSA and an FSA, be aware that the rules around using them together are strict. In most cases, you cannot contribute to a standard FSA while also enrolled in an HSA. A limited-purpose FSA – which covers only dental and vision expenses – is generally permitted alongside an HSA, but a general-purpose FSA is not. Check with your employer’s benefits administrator to confirm what applies to your specific plan