Flexible  Spending Arrangements

Flexible  spending arrangements are set up by employers to allow employees to set aside  pre-tax money to pay for qualified medical expenses during the year. Only  employers may set up an account, and employers may or may not contribute to the  account. Also, there may be a limit on the amount that employers and employees  can contribute to a health flexible spending arrangement. 



Health  flexible spending arrangements can be offered in conjunction with any type of  health insurance plan, or they can be offered on a stand-alone basis. In the  past, health flexible spending arrangements were subject to a use-it-or-lose-it  rule. Now, employers may give employees a 2-½ month grace period at the end of  the plan year to use up funds in the account. After that time, remaining funds from the previous plan year are forfeited. If you have a flexible health  spending arrangement, you should try to anticipate your health care expenses  for the coming year to avoid losing any money that you contribute and don't  spend.