Business, Legal & Accounting Glossary
A flexible spending account is a monetary employee benefit that may be offered by an employer for a specific purpose. Flexible spending account dollars are in essence a portion of pre-tax employee compensation that can be set aside for eligible use. In order to qualify for a tax-free flexible spending account, an employee must meet certain qualifications, such as uncovered medical care or child care expenses, as well as expenses associated with eldercare. The terms of a flexible spending account, including a withheld dollar amount, must be predetermined. A flexible spending account bears many similarities to health savings accounts (HSAs). Though unlike an HSA, a flexible spending account is somewhat more limited. Another practical disadvantage of a flexible spending account is that the term of a flexible spending account is limited to one year, and any unused money is thus squandered at the end of the term. A flexible spending account is a good option for those who have fixed medical expenses and lack health coverage.
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This glossary post was last updated: 9th February, 2020 | 2 Views.