Flexible Spending Account (FSA)

Key Features of an FSA

Flexible spending accounts are funded by your employee with pre-tax dollars up to $3,200 annually. Funds are used to pay for certain medical and dental expenses for your employee, their spouse, and their dependents. Some qualified expenses include:

• Health insurance deductibles and co-payments (but not premiums)
• Prescription medications
• Over-the-counter medicines with a doctor’s prescription (reimbursements for insulin are allowed without a prescription)
• Medical equipment and supplies like crutches, bandages, and diagnostic devices like blood sugar test kits

Employees generally must use FSA funds within the plan year. However, employers can provide a grace period of up to 2 1/2 months to use money in a flexible spending account or allow a carryover of up to $660 into the following plan year.

Employers can – but aren’t required to – make contributions to their employee’s FSA.

Benefits of Offering an FSA

Since money is taken out on a pre-tax basis, your employee’s taxable income is reduced, meaning both you (as the employer) and your employee may be able to lower your tax responsibility.

An FSA can help your employees save anywhere from 30 to 40 percent on their out-of-pocket expenses.

Through our affiliate GTM Insurance Agency, setting up an FSA is easy and straightforward.

Looking for some other employee benefit ideas? Check out these options or download our Employee Benefits Overview (PDF).

Health Insurance & Benefits Options Comparison

The information below will help you compare the various plans and select one that will best meet the needs of your nanny. These are contribution rates for 2025.

HRA

✔ Employer funded

✔ Employer tax savings

✘ Employee funded

✘ Employee tax savings

✔ Covers out-of-pocket expenses

✔ Covers insurance premiums

✘ Used to purchase health insurance

Contribution limit: No limit

Pairing: Group plan

Coverage restrictions: Must cover at least two employees

QSEHRA

✔ Employer funded

✔ Employer tax savings

✘ Employee funded

✘ Employee tax savings

✔ Covers out-of-pocket expenses

✔ Covers insurance premiums

✔ Used to purchase health insurance

Contribution limit: $6,350 single / $12,800 family

Pairing: Individual plans

Coverage restrictions: None

ICHRA

✔ Employer funded

✔ Employer tax savings

✘ Employee funded

✘ Employee tax savings

✔ Covers out-of-pocket expenses

✔ Covers insurance premiums

✔ Used to purchase health insurance

Contribution limit: No limit

Pairing: N/A

Coverage restrictions: None

FSA

✔ Employer funded

✔ Employer tax savings

✔ Employee funded

✔ Employee tax savings

✔ Covers out-of-pocket expenses

✘ Covers insurance premiums

✘ Used to purchase health insurance

Contribution limit: $3,300

Pairing: N/A

Coverage restrictions: None

HSA

✔ Employer funded

✔ Employer tax savings

✔ Employee funded

✔ Employee tax savings

✔ Covers out-of-pocket expenses

✔ Covers insurance premiums

✘ Used to purchase health insurance

Contribution limit: $4,300 single / $8,550 family

Pairing: High-deductible plan

Coverage restrictions: None