Flexible spending accounts (FSAs), sometimes called reimbursement accounts, are accounts set up by employers. These accounts allow employees to make annual, pre-tax contributions that can be used to pay for certain health care and dependent care expenses that are not paid for by insurance companies. FSAs are offered under the umbrella of cafeteria benefit plans and are sometimes called cafeteria plans. FSAs must comply with all applicable rules and regulations governing benefits under cafeteria plans.

Flexible Spending Accountsin Practice

Employers must establish flexible spending accounts so that they comply with all applicable federal legislation. Once an FSA is established, employees have the opportunity to sign up for the plan during the annual "open enrollment" period. During the sign-up period that precedes the plan year, employees must estimate the relevant costs they are likely to incur during the year and indicate the amount of money...