Question

A flexible spending account (FSA) is an employer-sponsored plan that allows each employee to have pretax earnings deposited into a specially designated account for the purpose of paying health-care bills and qualified child care expenses. True False

Answer 1

True

A flexible spending account (FSA) is a type of savings account that provides the account holder with specific tax advantages. An FSA, also called a flexible spending arrangement, is set up by an employer for an employee. The account allows employees to contribute a portion of their regular earnings to pay for qualified expenses related to medical and dental costs.

Another type of FSA is a dependent-care flexible spending account, which is used to pay for childcare expenses, for children age 12 and under. A dependent-care FSA has different maximum contribution rules than a medical-related flexible spending account.

An FSA is a type of savings account that allows employees to contribute a portion of their regular earnings to pay for qualified expenses.

Funds contributed to the account are deducted from the employee's earnings before they are made subject to payroll taxes.

The money in an FSA must be used by the end of the plan year but employers can offer a grace period of up to 2.5 months, through March 15 of the following year.