Sometimes called Flexible Spending Arrangements, FSAs are an arrangement through your employer that lets you pay for many out-of-pocket medical expenses with tax-free dollars. Allowed expenses include insurance co-payments and deductibles, qualified prescription drugs, insulin, and medical devices.
You decide how much to put in an FSA, up to a limit set by your employer. You aren't taxed on this money. If money is left at the end of the year, the employer can offer one of two options (not both):
- You get 2.5 more months to spend the left over money.
- You can carry over up to $500 to spend the next plan year.
Also see - Health Savings Accounts (HSAs) - similar arrangements for people with coverage they bought themselves (not job-based plans)