A pre-tax account for qualified medical expenses, with annual contribution limits and use-it-or-lose-it rules.
An FSA lets employees set aside pre-tax dollars for qualified medical expenses (Healthcare FSA) or dependent care expenses (Dependent Care FSA). 2026 healthcare FSA limit is approximately $3,200; dependent care FSA limit is $5,000 (family) / $2,500 (married filing separately).
The traditional "use-it-or-lose-it" rule has been softened — plans can offer a grace period (2.5 months after plan year end) or a small carryover ($640 in 2026), but not both.
FSAs require a Section 125 cafeteria plan document. PEOs administering Section 125 plans handle FSA enrollment, claims processing, and nondiscrimination testing automatically.
A pre-tax account for qualified medical expenses, with annual contribution limits and use-it-or-lose-it rules.
An FSA lets employees set aside pre-tax dollars for qualified medical expenses (Healthcare FSA) or dependent care expenses (Dependent Care FSA).
Most PEO buying decisions touch several related concepts at once. Flexible Spending Account (FSA) typically comes up alongside the other terms in this category. Closely related terms include Cafeteria plan (Section 125), Health Savings Account (HSA).
This is one entry from our PEO glossary covering payroll, benefits, workers comp, HR compliance, and PEO mechanics. Browse all terms.
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