How Does a FSA Work?
With an FSA, employees elect to have their annual contribution deducted from their paycheck each pay period, in equal installments throughout the year, until they reach the yearly maximum that you determined.
For 2020, they can contribute up to $2,750 for a Healthcare FSA, and up to $5,000 for a Dependent Care FSA.
The amount of their pay that goes into an FSA will not count as taxable income, so they will have immediate tax savings*.
FSA dollars can be used during the plan year to pay for qualified expenses and services.
*The amount you save in taxes with a Flexible Spending Account will vary depending on the amount you set aside in the account; your annual earnings; whether or not you pay Social Security taxes; the number of exemptions and deductions you claim on your tax return; your tax bracket and your state and local tax regulations. Check with your tax advisor for information on how participation will affect your tax savings.