Types of Flexible Spending Accounts – Your Options
Your business can offer its employee's a wide range of benefits to help keep them motivated and to attract the best new hires. Most employers think of health insurance as the main benefit to offer, but a recent study found that forty five percent of surveyed employees valued a flexible spending account as much as health insurance. A flexible spending account allows employees to contribute a portion of their income to the account, which is free from payroll tax. The money in the flexible spending account can then be used for a number of qualifying needs including health care. Unicorn HRO can help you set up and manage your flexible spending account with software solutions. There are a few different types of flexible spending accounts you'll need to consider for your employees.
The first, and most common, type of flexible spending account is known as the medical expense account. This flexible spending account is often used in conjunction with health insurance and allows employees to set aside tax free funds to pay for health related issues their insurance won't cover. Money in a flexible spending account of this nature can be used to pay insurance co-pays or purchase prescription drugs. And best of all the money in this flexible spending account can even be applied towards buying regular medical supplies such as cold medicine, Band-Aids and other over the counter drugs.
A dependent care flexible spending account is another type of flexible spending account that allows your employees to set aside tax free money to pay for the care of those dependent upon you. These flexible spending accounts are fairly common and provide alternative ways you’re your employees to provide for their families. These types of flexible spending accounts often apply to things such as daycare for your employee's children or even for elderly parents who depend upon them. Usually as much as five thousand dollars annually can be placed in this type of flexible spending account.
A less common flexible spending account is an adoption assistance flexible spending account. Adoption is a very expensive endeavor and the chance to place tax free dollars into a flexible spending account to help pay for it is valuable to prospective parents due to the extra money saved on taxes. The money placed into this type of flexible spending account can be applied to any cost incurred during the adoption process including legal fees. Many businesses offer this type of FSA to those who need it.
A fourth type of flexible spending account is known as a health insurance premium flexible spending account. This type of flexible spending account is often used by employees who don't have health insurance themselves but who are covered by their spouse's health insurance. There are some other types of flexible spending accounts available today, but these are the four most common. Managing your FSA system in your business can be complicated, and using software solutions from Unicorn HRO can help make the entire process much easier on both you and your employees. If you want to give your employees another great benefit option to help them know that you care and value them, flexible spending accounts are a great addition to your benefits package.