What are Flexible Benefit Plans
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Flexible Benefit Plans are often thought of as Flexible Spending Accounts or FSAs. They include Healthcare FSAs, Dependent Care FSAs, and transportation benefits (transit and parking), that employees use to pay for eligible healthcare, daycare, elder care and transportation expenses through payroll redirection. Both employers and employees benefit from the tax savings offered by these plans because salaries are reduced by the amount re-directed to fund the account.

All medical care expenses must be incurred during the plan year and the "use it or lose it" rule applies to any funds not spent before the end of the plan year. Unlike HSAs, funds in a Healthcare FSA do not roll over to the next plan year unless your employer has elected an optional rollover of up to $500. Funds in a Dependent Care FSA do not roll over to the next plan year. Funds in FSAs may be forfeited if you leave the company.

Employees must make their plan year elections prior to the start date of the FSA and cannot change their elections during the year unless they experience a qualifying event like marriage, divorce, the birth of a child, etc.

Participation in one type of FSA (Healthcare) does not affect participation in another type of FSA (Dependent Care), but funds cannot be transferred from one FSA to another.

The Healthcare FSA and Dependent Care FSA are governed by Section 125 of the IRS Code and are often referred to as Section 125 Cafeteria Plans. The transportation benefits are governed by Section 132 of the IRS Code.