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FSA

A flexible spending account, also known as a FSA or cafeteria plan, is an employer sponsored healthcare benefit that allows employees to set aside pre-tax payroll contributions to over the cost of qualified health related expenses. Employees save federal, FICA, and in most instances, state taxes on their deferrals which can amount to 30%-45% in tax savings. Companies who offer these plans don’t have to pay the matching FICA taxes on employee deferrals and these savings often cover all of the administrative costs of hiring a TPA to administer the plan. There are a few IRS rules that apply to FSA plans, including discrimination tests for Highly Compensated and Key Employees, “use-it-or-lose-it”, rollover options, IRS Form 5500, etc. A qualified TPA will be able to guide the employee through the set-up and administration process and all integrated TPAs receive all elections electronically.