A flexible spending account (FSA) has these features:
- An FSA allows employees to be reimbursed for medical expenses.
- Money is deducted from the employee’s paycheck to fund his or her FSA, and the contributions are tax deductible.
- Withdrawals are not taxable if paying for qualified medical expenses of the employee or the employee’s family.
- An FSA is a “use-it-or-lose-it” plan. This means that money in the account at the end of the plan year cannot be carried over to the next year.