Flexible Spending Accounts: An Employee Benefit on the Rise

Flexible Spending Accounts: An Employee Benefit on the Rise

As the cost of health insurance and treatments continues to rise, more employers are recognizing the benefits of offering flexible spending accounts (FSAs) to their employees. Not only do FSAs offer tax savings, but they also provide a way for employees who are not enrolled in high-deductible health plans to save money throughout the year for medical and related expenses.

According to a study by the National Business Group on Health, the number of employers offering FSAs is expected to reach 66% in 2023, a 27% increase from just over a decade ago. With the rising cost of healthcare, the popularity of FSAs is likely to continue growing as employers look for ways to help their employees save for medical services, pharmaceuticals, copays, coinsurance, and other expenses.

Participating employees can contribute up to $3,050 in 2023 to their FSA, with the amount not subject to federal income tax, Social Security tax, or Medicare tax. Employers may also contribute to an employee's FSA, up to a maximum of $500 per plan year.

Under the law, enrollees must use up the funds they set aside during the year or forfeit the remainder, unless the employer allows part of the funds to be carried over. Some employers may provide a two-and-a-half-month grace period during which employees can use their remaining funds.

FSAs can be used to pay for a wide range of qualified medical expenses, including copays, deductibles, dental and vision care services, chiropractic and acupuncture, prescription drugs, and over-the-counter medications, among others.

In conclusion, FSAs are a valuable benefit that can help employees save money and prepare for unexpected medical expenses. If you're an employer, consider offering FSAs to your workforce, and be sure to clearly communicate your carryover limit and any changes for the upcoming year.

Thanks for reading! If you have any questions or want to learn more about employee benefits, feel free to reach out to me, Hunter Shepherd, President of Kennion Benefit Advisors. I'd be happy to chat. Give me a call at 205-641-0469 or Get A Quote. Looking forward to connecting with you!