When it comes to offering benefits, there are plenty of options for both you and your team—one in particular being flexible spending accounts (FSAs). These plans offer tax advantages for employers as well as significant tax savings potential for employees, allowing them to save money from their paycheck pre-tax.
But what is a flexible spending account exactly? In this blog post, we’ll explain everything you need to know about these accounts—how they work, how to set up one at your workplace and the incredible benefits they offer. Read on to learn more about offering an FSA to your employees.
What is a flexible spending account (FSA)?
Flexible spending accounts, also known as FSA, are a type of employer-sponsored benefit plan. They allow employees to set aside pre-tax dollars from their paychecks to pay for eligible healthcare expenses. This means that your employees can potentially save hundreds of dollars each year on their healthcare expenses since the contributions to the FSA are made before taxes are taken out.
The money that is set aside in an FSA can be used for a wide range of eligible expenses. These can include copays, deductibles, prescription medications, and certain medical devices. Surprisingly, some flexible spending accounts also reimburse expenses related to vision and dental care.
What are the benefits of flexible spending accounts?
They can save money on healthcare expenses
By setting aside pre-tax money from their paychecks, your employees can potentially save hundreds of dollars on their healthcare expenses each year.
FSAs offer employers payroll tax savings
Employers can also save money on payroll taxes since the contributions are made with pre-tax dollars. This can help you offset the cost of offering the FSA benefit to your employees.
They can attract and retain top talent
Offering an FSA is a valuable benefit that many employees look for when considering job offers. By providing this benefit, you can attract top talent and potentially reduce turnover rates.
FSAs encourage proactive healthcare decisions
Since FSA funds can only be used for eligible healthcare expenses, employees may be more likely to seek preventative care and take other proactive healthcare measures.
They promote financial wellness
By helping employees save money on healthcare expenses, FSAs can promote financial wellness and reduce financial stress.
How do you set up a flexible spending account?
To set up an FSA, you’ll need to work with a third-party administrator (TPA). The TPA will provide you with information on the maximum contribution limit and other rules and regulations that you’ll need to follow. One of our pro tips is to compare costs and services offered by different administrators before making a decision.
Next, you’ll have to work with your FSA administrator to create plan documents that outline the terms and conditions of the FSA. These can include eligibility requirements, contribution limits, and covered expenses. Together you and your administrator can communicate the details of the FSA to your employees. Then you’ll need to provide them with enrollment materials and explain how the FSA works, including how to contribute and access the funds.
Finally, you will need to monitor the FSA throughout the year to ensure compliance with IRS regulations and to address any issues that arise. This includes continuing to work with your FSA administrator to make any necessary adjustments or updates to the plan.
Get the most out of FSA funds with the FSA Store
One challenge with FSAs is that any unused funds at the end of the year typically expire. While this “use-it-or-lose-it” feature can be a downside to FSAs, employers can help their employees maximize their funds by educating them on eligible expenses and reminding them of the deadline to use their funds.
For example, you can allow employees to carry over a certain amount of unused funds into the next year. You can also choose to offer a grace period in which they can use their funds from the previous year.
Another option is to encourage employees to use their FSA funds before the end of the year by reminding them of the deadline. You can also promote FSA-eligible products and services like the FSA Store.
The FSA Store is an online retailer that specializes in selling FSA-eligible products. This includes things like first aid kits, sunscreen, contact lens solution, and more. They make it easy for employees to use their FSA funds by offering a wide range of eligible products in one convenient location. Plus, they offer free shipping on orders over $50, which is a great added perk.
Overall, FSAs can be a valuable benefit for both employers and employees. By potentially saving money on healthcare expenses, attracting top talent, and promoting financial wellness, FSAs can be an effective tool for small businesses looking to provide valuable benefits to their employees.
By working with a third party administrator and promoting The FSA Store, you can help your employees get the most out of their funds and potentially save money on their healthcare expenses.
If you’re interested in offering a flexible spending account or want to compare it against other traditional group health options, enter your zip code in the bar above or call (877) 658-2374 to speak with a benefits advisor.