Flexible spending accounts (FSAs) and transportation accounts give employees a way to budget and pay for medical, dependent care and commuter costs, while reducing the employer’s payroll tax burden.

Benefits for employers and employees
An FSA can add value to an existing benefits package, which can help employers attract and retain employees and empower employees to make smart spending decisions.

Additional benefits for employers and employees include:

• Tax savings — Employers and employees save on taxes because employees’ taxable income is reduced by the amounts they deposit into their accounts up to IRS limits.
• Reduced administration — Plan participants can manage key aspects of their accounts online, and our simple claims and reimbursement process eases the administrative burden.
• Savings when you need it — Employees have money set aside for important health and dependent care expenses.

How it works
With an FSA, employees save money by reducing their taxable income and budgeting for health care costs:

• Employees make regular pretax contributions to the account from their paychecks.
• Then, they can use the linked debit card to pay for health care, dependent care, and transit costs, or pay for them out-of-pocket and reimburse themselves from their FSA.

Individual savings example
An employee elects to have $100 withheld from his or her paycheck every week and deposited into an FSA.

*For 2011, FICA rate was reduced to 5.65% for employees.

Estimating costs
Employees should estimate their annual FSA contributions carefully because they lose any funds remaining at the end of the year. However, even when they leave funds behind, most people still come out ahead due to the tax savings.