What is a flexible spending account (FSA)?

An FSA is an employer-sponsored benefits program that enables employees to deduct pre-tax dollars from their paychecks to pay for qualified medical expenses for themselves, their spouses, and their dependents. At the beginning of each plan year, employees can elect to have a certain portion of their pre-tax income contributed to fund their FSA. Because FSAs are employer-sponsored, an employee has access to the entire year’s funds on the first day of the year. Employees must use FSA funds within the plan year. However, the plan can provide for either a grace period or a carryover up to $500. Any unused funds are returned to the employer at the end of the year.

FSA eligibility

Typically, anyone whose employer offers an FSA can participate; including employees not covered under the employer’s health plan. Employers may exclude certain types of employees, such as part-time, seasonal or temporary.

FSA contribution limits

Contributions to an FSA are limited by the IRS to $2,650 per year. If an employee is married, each spouse may contribute up to $2,650 to his or her own FSA, even if both participate in the same FSA sponsored by the same employer. An employer’s plan may further limit the contributions into an FSA.

FSA funds are not rolled over year to year

FSAs are generally use it or lose it plans. This means that amounts in the FSA at the end of the plan year generally cannot be carried over to the next year. Additionally, if an accountholder leaves an employer or retires, unused funds are forfeited. However, the plan can provide for either a grace period or a carryover.

FSAs with limited carryover

Employers may allow up to $500 of unused FSA funds remaining at the end of a plan year to be carried over to the next year.

FSAs with a grace period

A grace period is an extension beyond the plan year, during which employees may still incur eligible FSA expenses and use the funds remaining in their accounts to cover those expenses.

How HealthEquity FSAs are different

Together, your health plan and HealthEquity can deliver a fully integrated approach to flexible spending accounts (FSAs) with easy enrollment, less paperwork, and hassle-free payments/reimbursements. This means simplified account management as well as online tools, resources and education. You’ll also get the dedicated service and support that distinguishes our offerings.

Integrated claims and easy execution

Complete data integration between HealthEquity and your health plan enables easy execution before, during and after enrollment.

Comprehensive employee education

We understand healthcare consumers and speak effectively to their values and experiences. Our tailored communications provide a clear, positive message that engages employees and increases understanding.

Dedicated employer support team and powerful resources

Dedicated support and education for partners through HealthEquity’s employer support team, employer web portal and other tools.

Convenient employer portal

Employers and members benefit from proprietary web capabilities featuring online payments and integrated claims data.

Other types of FSAs

Post-deductible FSA or PDFSA

PDFSAs can be used for eligible medical expenses once a specified minimum deductible has been met. If you have an integrated HSA with HealthEquity, we can automatically accumulate incurred claims towards employee’s PDFSA deductibles.

Dependent care FSA or DCRA

A dependent care FSA enables you to set aside pre-tax dollars to pay for qualified dependent care expenses. Funds can be used to pay for day care, preschool, elderly care or other dependent care. To qualify for a DCRA, the IRS requires that the dependent care is necessary for an employee and their spouse to work, look for work or attend school full-time, along with other requirements.

Limited-purpose FSA (LPFSA)

Used in conjunction with a health savings account (HSA), an LPFSA allows employees to contribute additional pre-tax dollars to use for dental and/or vision expenses. This allows them to maximize their pre-tax HSA contributions and contribute additional pre-tax dollars to an LPFSA.

FSA FAQs

How much can employees elect to contribute to an FSA?

As of 2018, the IRS has capped FSA elections for a household at $2,650 per year. Dependent care FSA (DCRA) limits are not affected by this regulation and remain at $5,000 per year for a household. Spouses filing separately are each limited to $2,500 per year for DCRA. It is the member’s responsibility to ensure eligibility requirements as well as if they are eligible for the plan and expenses submitted. Individuals should consult a tax advisor as individual factors and situations vary.

How do integrated claims benefit employees enrolled in an FSA?

Your employees’ claims information is fed directly to their online account. This allows them to make payments or request reimbursement on claims that are already verified, which results in faster processing and less paperwork.

Who owns the account?

Technically, the account funds are directed by you, the employer. FSA members have access to the funds they elect to contribute for the duration of the plan year and any applicable grace/runout periods. After that, unused funds are returned to you and can be used to pay administration expenses. You may also elect to allow your employees to carry over up to $500 to the next plan year, instead of offering a grace period.

Who pays the monthly flexible spending account administration fee?

The employer pays the monthly FSA administration fee.

How do I manage the FSA program moving forward?

Upon group enrollment, you will have access to the HealthEquity employer portal. Its features allow you to:

  • Create additional logins for your staff with role-based permission levels and email preferences
  • Set up banking information
  • View employee listing with status, coverage level and coverage dates
  • Generate reports and create system alerts
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