Flexible Spending Account - Essay Sample

A Flexible Spending Account refers to a particular account that is different from other types of accounts. This account is deposited money which is used to cater for various health care expenses and related costs. One can use the Flexible Spending Account if the job allows a health plan. Some of the expenses that are paid for using this account include the copayments, the deductible, and payment for some medicine as well as other related costs. The flexible saving accounts tend to be optional it is the decision of the employer to decide if they should be implemented in his business or not (Audit of the Shps, Inc. As Administrator of the Federal Flexible Spending Account Program for Contract Years 2004 Through 2007 Louisville, Kentucky).

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Advantages of Flexible Spending Accounts

This account is of great benefit to an employee. It is because it acts as a way of saving an employee from being taxed. This money that is stored in this account is never taxed since it is paid through the employees payroll deduction meaning that the money is taken out then the remaining amount is the one that is subjected to taxation. It, in turn, leads the employee ending up paying less tax (Jack, et al)

This type of account is of great importance to the employee because it helps him to increase his medical savings alongside other medical covers. The FSA helps cover an employees auxiliary medical costs, costs that need to be paid at the counter such as prescriptions and as well as costs that are related to preventative tests which are not covered by other covers like the insurance cover.

The FSA helps an employee to be able to increase his savings. This is because it gives a chance to the employee to be able to save on the taxes which in turn leaving more money for the employee at the end of a given year. Hence it is of great importance for our boss to implement the FSAs in the Fashion Arena Company.

My boss should also apply Flexible Spending Accounts in our company because it acts as an immediate source of funds to the employees. It is because after an employee state the amount that he wants to be deducted from his salary and deposited to the FSA account it is automatically removed from every payroll and the money is available to him at any time he wants to cater for his health bills even in the case of an emergency (Manaloto).

The other reason as to why this account is of importance to an employee and my boss should consider implementing them in the company is that they are connected to debit cards, and hence an employee can quickly and directly pay for his expenses. This will be of great importance to the employees of Fashion Arena Company.

Disadvantages of Flexible Spending Accounts

Despite these accounts being of great importance to an employee they also have some drawbacks that are attached to them. One of the disadvantages of these accounts is that they require the owner to use the funds that he has deposited within a period of one year and after that, the funds will expire (Mulvey, et al).

The other limitation of these accounts is that despite the money being deducted from the employees payroll they are tied to the employer, and this means that if one loses his job means that he has also lost his Flexible Spending Account.

The employees are limited to the time that they should enroll themselves in these accounts. They are required to do so during the period which their employers declare that it is open for enrollment and when one fails to do so during that given time one has to wait for the next year.

The final limitation of the Flexible Spending Accounts is that an employee cannot write-off tax. If a medical expense is reimbursed through this account, the medical expense cannot be written off even when one files the tax.

In conclusion, the boss should implement the FSA for the employee since these contributions made to this accounts can help the employee to be able to save more money. The employee will be in a position to keep some of his money with the support of this account for future use.

Works Cited

Audit of the Shps, Inc. As Administrator of the Federal Flexible Spending Account Program for Contract Years 2004 Through 2007 Louisville, Kentucky. 2009.

Jack, William, et al. Employee Cost-Sharing and the Welfare Effects of Flexible Spending Accounts. National Bureau of Economic Research, 2005.

Manaloto, Mary D. L. Employee Perspectives of Health Flexible Spending Accounts: Cultural Barriers and Facilitators. U of California, Davis, 2012.

Mulvey, Janemarie, et al. Health Care Flexible Spending Accounts. Congressional Research Service, Library of Congress, 2004.