What is Flexible Spending Arrangement?

Flexible spending arrangements refer to the money that is set aside by your employers to pay for the medical expenses. It can be offered with a health insurance plan. Flexible spending arrangement account can only be set up by the employers. The money that is used to contribute to the account is not taxed yet. Employers will use a percentage of your pretax paycheck to contribute to the account. Employers can contribute their own money to the account. If the employer is allowed to make contribution, he cannot contribute higher than the limit set by the insurance company. Some flexible spending arrangements can be offered alone.

The disadvantage of flexible spending arrangement is that you have to use the funds in the account within a limited time period. Many years ago, participants of a flexible spending arrangement program are not given grace period. As a result, health policy holders only have the choice of use or lose the funds. Nowadays, many employers give grace periods for employees to spend the funds.

Most employers give employees a grace period of two months or half month to use the funds. If you did not use the funds, they will be wasted away and you will no longer have access to them. Flexible spending arrangements are suitable for people that frequently pay visits to the clinics. If you often visit the doctor’s office, you will find that flexible spending arrangement is useful. If you seldom get sick, flexible spending arrangement is not suitable.