How to set up a Flexible Spending Account for your company

Perks of an FSA

-Employees can save up to 40% on the money they contribute to an FSA.

-FSA funds are exempt not only from income taxes, but also from payroll taxes for Social Security and Medicare, resulting in savings to the employee and employer.

-Increased spendable income for employees.

-FSAs offer an additional employee benefit in the overall benefits package.

FSA Administration

Third Party Administrators (TPAs) are a great resource for employers as they have extensive knowledge about FSAs. FSAs can be complicated, so having a TPA handle them is also time effective for employers. FSA administration also requires HIPAA and ERISA compliance, and TPAs can typically provide an employer with the required documents and administrative materials necessary to remain compliant.

Employers decide which expenses they deem FSA eligible (in compliance with IRS guidelines), and have a say in the plan structure, which is explained for employees in the required Summary Plan Description. The Summary Plan Description describes all the details of the FSA – coverage questions, enrollment information, claims handling, which expenses qualify as eligible and more, and is necessary for ERISA compliance.