What are the different types of FSAs available?
Healthcare FSA With a healthcare FSA, your employees can pay for eligible healthcare expenses on a pre-tax basis, which reduces the amount paid for federal income tax, FICA tax and, as applicable, their state income taxes. Healthcare FSAs cover an extensive list of eligible, reimbursable expenses, as defined by IRS Code Section 213(d).
Dependent Care FSA Dependent care FSAs (DCAs) gives your employees the ability to pay for work-related dependent care expenses with pretax dollars, which allows them to save on federal income tax, FICA tax and, as applicable, their state income taxes. DCAs may provide your employees more tax advantages than the federal income tax credit.
Limited-Purpose FSA If you offer an HSA-compatible high-deductible health plan paired with a health savings account (HSA), you may offer only a limited-purpose FSA to those employees that have an HSA. The limited-purpose FSA is designed to complement the HSA and may be established to pay for eligible vision and dental expenses. Medical expenses are not permitted, because the tax-favored HSA is used to fund those costs.