A Flexible Spending Account (FSA) is a special account that you can put money into to pay for certain out-of-pocket health care costs. It is a tax-advantaged financial account that results in payroll tax savings. Here are some key features of an FSA:

• Tax savings: You dont pay taxes on the money you put into an FSA, which means youll save an amount equal to the taxes you would have paid on the money you set aside.

• Employer contributions: Employers may make contributions to your FSA, but they arent required to.

• Allowed expenses: You can use the money in an FSA to pay for many out-of-pocket medical expenses with tax-free dollars, including insurance copayments, deductibles, qualified prescription drugs, insulin, and medical devices.

• Annual limit: You decide how much to put in an FSA, up to a limit set by your employer.

• Use-it-or-lose-it rule: Any funds that are unspent by the end of each plan year are forfeited to the account holders employer. However, some accounts might have a lifeline as employers have the option of offering one of two deadline extensions: the FSA Grace Period or the $570 rollover.

• Debit cards: In 2000, employers began to issue debit cards to participating employees to make it easier to access flexible spending account funds.

FSAs are sometimes called Flexible Spending Arrangements. They are different from Health Savings Accounts (HSAs), which are another type of tax-advantaged financial account that you can use to pay for qualified medical expenses.