Description
HIFSA indicates whether the person had a Flexible Spending Account (FSA). These accounts are not insurance plans, and persons with an FSA are not required to have a private insurance plan (unlike health savings accounts [HSA]). Flexible Spending Accounts can be used to pay for "qualified expenses"; such expenses are usually medical expenses, but they can include other things, such as expenses for dependent care.
Definitions
The survey text provided the following definition of an FSA:
These accounts are offered by some employers to allow employees to set aside pre-tax dollars of their own money for their use throughout the year to reimburse themselves for their out-of-pocket expenses for health care. With this type of account, any money remaining in the account at the end of the year, following a short grace period, is lost to the employee.
Money deducted from an employee's pay into an FSA is not subject to payroll taxes; however, funds not used by the end of the plan year are forfeited to the employer.
The 2007 Field Representative's Manual provided a more detailed definition:
[show more]Flexible Spending Accounts (FSAs) are employer-established benefit plans that reimburse employees for specified medical expenses as they are incurred. These accounts are allowed under section 125 of the Internal Revenue Code. The employee contributes funds to the account through a salary reduction agreement and is able to withdraw the funds set aside to pay for medical bills. The salary reduction agreement means that any funds set aside in a FSA escape both income tax and Social Security tax. Employers may contribute to these accounts as well. Once the amount of contribution has been designated during an open enrollment period that occurs once each year, the employee is not allowed to change the amount or drop out of the FSA during the year unless he or she experiences a change in family status. By law, the employee forfeits any unspent funds in the account at the end of the year other than the 2.5 month grace period. There is no requirement to have a private health insurance plan with a FSA.
