Pros and Cons of all FSAs

FSAs (Flexible Spending Accounts) are a common feature that many employers offer to their employees as a way to help pay for medical expenses. Flexible spending accounts carry with them some advantages and disadvantages that you should know about. Here are some of the pros and cons of FSAs.


One of the advantages of the flexible spending account is that they are pre-funded by the employer. This means that at the beginning of the year, the employer funds the account with the entire amount of the annual contribution. If you are an employee, this means that you can access your benefits from the first day of the year before you have even made any contributions. Then, throughout the rest of the year you will deduct a portion of your paycheck to reimburse the employer. If you are the employer, this could be a disadvantage because if the employee is terminated, they do not have to repay the money that they have used.

Another advantage of this type of plan is that they can pay for over-the-counter drugs. There is a list of specific over-the-counter drugs that can be paid for with funds from a flexible spending account. Many other types of health plans do not cover over-the-counter drugs in any form. This provides you with a lot of flexibility in how you can use the funds from your flexible spending account.

With a flexible spending account, you will be able to help yourself with small medical expenses. Without this type of plan, you may have to come up with money for co-pays when you visit the doctor, prescription costs, and many other small fees. However, by using a flexible spending account, you can avoid a lot of these little expenses and protect your budget.


One of the big disadvantages of this type of plan is that you have to use the funds or lose them. Throughout the course of the year, you are going to be making regular contributions to the flexible spending account out of your own paycheck. At the end of the year, the money that you have put into the account will be lost. You will not be able to roll the balance over to the next year. This makes it difficult for many individuals to determine how much they should use out of their flexible spending account throughout the course of the year. This means that you will never have your flexible spending account fully funded because you decide to start over every single year.

Another disadvantage of this type of plan deals with childcare. Many individuals choose to utilize the funds from their FSAs to pay for childcare expenses throughout the course of the year. While this is perfectly fine, it could cause you to lose your child tax credit when you file your taxes. The child tax credit can be a huge source of savings on your taxes and it you will essentially lose this if you take advantage of your flexible spending account in this area.

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