Flexible Spending Account (FSA) is:

Flexible Spending Account (FSA) is:

• A. An employer-established plan that permits the employee to defer pre-tax earnings into a designated account to pay unreimbursed medical expenses.
• B. A retirement savings vehicle funded with post-tax dollars.
• C. A government program for medical subsidies.
• D. An employee stock purchase plan.

Answer: (A)

An FSA is an employer-established account funded through pre-tax payroll deductions that you can use to pay for eligible unreimbursed medical expenses. The main benefit is reducing your taxable income in the year you contribute, since the money is set aside before taxes are taken out. You can reimburse things like copays, prescriptions, and procedures that aren’t covered by insurance, up to the amount you elected for the year. There are usually limits and a deadline or carryover rule for using the funds, so any money not spent within the plan year may be forfeited. This isn’t a retirement savings vehicle, a government program, or an employee stock plan.

An FSA is an employer-established account funded through pre-tax payroll deductions that you can use to pay for eligible unreimbursed medical expenses. The main benefit is reducing your taxable income in the year you contribute, since the money is set aside before taxes are taken out. You can reimburse things like copays, prescriptions, and procedures that aren’t covered by insurance, up to the amount you elected for the year. There are usually limits and a deadline or carryover rule for using the funds, so any money not spent within the plan year may be forfeited. This isn’t a retirement savings vehicle, a government program, or an employee stock plan.