Flexible Spending Account (FSA) FAQs

  • What is a Flexible Spending Account (Section 125)?

    There are two types of Flexible Spending Accounts, also known as Section 125 accounts, and it is optional to set either one up:

    1. A Medical FSA is a special account that you sign up for to put money in through payroll deductions to pay for certain out-of-pocket health care and dental expenses for you, your spouse and eligible dependents.

    2. A Dependent FSA is an account, funded with payroll deductions also, set up to pay for eligible dependent care services such as child and adult care services, summer day camp, before and after school programs, etc. 

    You do not have to pay taxes on the money in either account (no Federal income tax, social security taxes (FICA) and State taxes are taken) and you can sign up for both accounts if you want.

    The IRS regulates these accounts and there is a maximum amount that is allowed for each. This amount varies each calendar year and for 2020, the maximum for a Medical FSA is $2750 and a Dependent FSA is $5000.

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  • When do I have to use the FSA money, and what happens if I don’t use the whole amount?

    The FSA amounts are based on the calendar year, which runs from January through December. If you have up to $550 in unused funds in your account, that money will rollover into the new year.

    You must sign up within 30 days of employment or during the open enrollment period each year for a January 1st start date.

    You decide the amount to be deducted from your pay up to the maximum.  As mentioned above, you are allowed to rollover unused funds in your FSA up to $550 per year.

    If you sign up mid-year as a new employee, keep in mind that you may need to pro-rate amounts.

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  • Does the same FSA amount come out each year?

    You need to submit a FSA Enrollment Form every Open Enrollment (November 1-30) to take effect the following January through December 31st.

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