What is a Flexible Spending Account?

Sometimes referred to as a cafeteria plan, flex plan or a Section 125 plan, a Flexible Spending Account (FSA) lets employees set aside a certain amount of each paycheck into an account — before paying income taxes.

During the year, participants have access to this account for reimbursement of expenses, not covered by insurance, that they regularly pay for, such as:

Deductibles, co-pays and other eligible expenses not covered by insurance.

Prescription drugs and medical supplies.

Over-the-counter drugs that are medically necessary like allergy medications, aspirin or antacids.

Dietary supplements and vitamins with doctor's letter of medical necessity.

Dental services, orthodontics and dentures.

Eyeglasses, contacts, solutions and eye surgery.

Weight-loss programs (associated with a specific disease).

Weight-loss over-the-counter drugs with doctor's letter of medical necessity.

Chiropractic services.

Vitamins with doctor's letter of medical necessity.

Psychiatric care and psychologist's fees.

Smoking-cessation programs.

Adult and child day care services.

Adoption expenses.

When employees use tax-free dollars to pay for these expenses, they realize an increase in their spending power, and substantial tax savings.

The company saves too — about 8% (FICA match) on every dollar employees contribute to the plan.