Flexible Spending Account or FSA, (also called a flex plan, reimbursement account, Flex 125, Medical Spending Account, a Section 125, Tax Savings Plan, or a Cafeteria Plan), is an employee benefit program that allows you to set aside money, on a pre-tax basis, for certain kinds of common expenses. With an FSA, you can reduce your taxes while paying for service costs you incur anyway.

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An employer offers the plan to all eligible employees. Those who opt for the program complete a simple agreement to participate. This agreement states how much money the employee wishes to place into their flex account during the plan year. Each employee's participation is purely voluntary.

Each pay period an amount is deducted prior to calculating Federal and social security tax. In some states, the contribution may also be exempt from state and local taxes. The amount is placed into an account.

As expenses occur, the employee submits a simple claim form and monies are reimbursed.

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FSAs let you set aside money before taxes are deducted from your paycheck. This means the amount of income your taxes are based upon will be lower, and as a result, your tax liability is lowerts.

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Flexible Spending Account allows employees to be reimbursed for out-of-pocket healthcare expenses that are not covered by insurance, and that meet IRS deductible expense rules under Code Section 213. An example is the deductible portion of your health care plan. Other examples include prescription drug copayments, elective surgeries, eyeglasses, and laser vision corrections.

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