Both the Healthcare FSA and the Dependent Care FSA allow eligible employees to contribute pretax monies through payroll deduction. During the year, employees have access to this account for reimbursement of certain medical, dental, vision, and Rx expenses or dependent care expenses. By using pretax dollars to pay for these expenses, employees can experience substantial tax savings.
Note: Employees should be careful when selecting the amount they wish to have payroll-deducted. If an employee has a Healthcare FSA, he or she is permitted to carry over $500 of unused funds into the next year; however, anything in excess of $500 will be forfeited.