Flexible Spending Accounts (FSAs) are pre-tax health accounts where a predetermined amount of money is deposited directly into the account by the employee. An employer can also choose to contribute to the FSA account, but this is not mandatory.
The maximum amount of contributions added to the account each year cannot exceed $2,600 per employer. FSA funds can be used for co-payments, coinsurance, deductibles, prescriptions and other medical supplies. Typically, all funds in your FSA account will need to be used before the end of the year. Employers can elect to provide a grace period of up to an extra 2 1/2 months into the following year, or allow $500 to roll over to the following year, however, neither of these are required. The FSA account can also be used for medical expenses for any dependents (such as spouse and children).
The FSA account benefits employees because they are able to contribute pre-tax dollars to the account and pay for uncovered health expenses for themselves and their dependents. For employers, offering FSA plans to employees can reduce employee taxable wages, and can also be an added perk to employees to cover the uncovered health expenses.
In addition to a Health FSA account, employers can also offer Dependent Care FSA. A Dependent Care FSA is a pre-tax benefit that can be used to pay for dependent care, such as day care, preschool, and child and adult care. Since these funds are pre-tax dollars, employees can benefit from saving money on these common expenses. This benefit can be attractive for employees with high dependent care costs when offered by an employer.
TPA Stream is building tools to make managing health data easier for administrators, brokers and employers. Our first offering is focused on attacking pre-tax health accounts, such as FSA accounts. Our proprietary cloud based platform collects claims data and EOBs automatically on behalf of employees and then electronically sends the data to the administrator’s benefits administration software for reimbursement and substantiation with little or no human intervention! As a result, administrative costs are significantly reduced and employees avoid the hassle of submitting claims.
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