FSAs

C-corp owners can use FSAs, but sole proprietors, partners, and 2%+ S-corp shareholders can’t. They’re not treated as employees under IRS rules for cafeteria plans.

Yes. Most FSA expenses require documentation, but some can be auto-adjudicated at the point of sale. If proof is requested and not provided, your card may be suspended.

Yes. Many over-the-counter items like pain relievers, allergy meds, and first aid supplies are FSA-eligible—no prescription needed, thanks to changes made under the CARES Act.

No, not unless you experience a qualifying life event. A change in expenses alone isn’t enough—you’ll need a status change that your employer’s plan recognizes under IRS rules.

You generally lose access to unused FSA funds when you leave your job. Some healthcare FSAs may be continued through COBRA, but dependent care FSAs cannot.

Yes. FSA funds can be used for eligible expenses for your spouse or dependents, even if they aren’t enrolled in your health insurance plan. But access to your HSA funds could disqualify them from contributing to an HSA.

Healthcare FSAs cover medical expenses and are fully available day one. Dependent care FSAs help with work-related child or elder care costs and are only available as funds are contributed.

With healthcare FSAs, your full annual election is available on day one—even though you repay it through payroll deductions over the year. Employers front the funds and carry the risk.

FSA elections are generally locked in for the entire plan year. You can’t change your contribution unless you experience a qualifying life event, and your employer’s plan allows mid-year changes.

Employer FSA contributions are capped at the greater of $500 or a dollar-for-dollar match of the employee’s contribution. Contributions must follow IRS rules and plan design limits.

The 2025 FSA contribution limit is $3,300 per employee, regardless of whether they have individual or family coverage. Employers may also contribute additional funds, depending on the employee’s contribution amount.

No. Employees don’t have to enroll in the group health plan to participate in a healthcare FSA—but the employer must offer a group health plan to offer an FSA.

Usually not—unless the FSA is limited-purpose (covering only dental and vision). General-purpose FSAs make you ineligible to contribute to an HSA under IRS rules.

FSA funds are generally “use it or lose it,” but your employer may offer a grace period or allow up to 20% of the maximum contribution (up to $660 in 2025) to roll over into the next plan year.

FSA funds can be used for eligible out-of-pocket expenses like copays, prescriptions, dental and vision care, and over-the-counter items. Exact eligibility follows IRS guidelines and your plan’s rules.

An FSA lets employees set aside pre-tax dollars to pay for eligible medical or dependent care expenses. It lowers taxable income but is generally “use it or lose it.”