Health Insurance

FSA (Flexible Spending Account)

An FSA reduces your taxable income by letting you set aside pre-tax money for predictable medical costs, but unspent funds generally expire at year-end.

Last reviewed: May 2026 · Editorial methodology

Definition

A Flexible Spending Account (FSA) is an employer-offered benefit that allows employees to set aside pre-tax payroll dollars — up to the IRS annual limit — to cover qualified out-of-pocket medical, dental, and vision expenses. The 2026 employee contribution limit is $3,300. One important distinction from an HSA is that FSA money is generally 'use-it-or-lose-it': funds not spent by the plan year deadline are forfeited, though employers may offer a grace period of up to 2.5 months or allow a rollover of up to $660 (2026 IRS limit). Unlike an HSA, FSAs do not require enrollment in an HDHP, making them accessible to anyone with employer-sponsored health insurance. The entire elected FSA amount is available on day one of the plan year, which can be useful for front-loaded expenses like surgery early in the year. FSA funds cannot be invested or grown like HSA balances and are not portable if you leave your employer mid-year.

Where this term matters

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Tip

Glossary definitions are educational. Always check your own policy language — insurers can define common terms differently from one another. When in doubt, request a written explanation from your agent.

Related terms

HSA (Health Savings Account)An HSA lets you contribute pre-tax dollars, grow them tax-free, and withdraw tax-free for medical costs — often called the triple tax advantage.LPFSA (Limited Purpose FSA)An LPFSA lets HSA holders enjoy FSA tax benefits for dental and vision costs without disqualifying their HSA.HRA (Health Reimbursement Arrangement)Unlike an HSA or FSA, an HRA is funded entirely by the employer and reimburses employees for medical costs up to a set annual limit.HDHP (High-Deductible Health Plan)An HDHP trades a lower monthly premium for a higher deductible, making it pairable with a tax-advantaged HSA.

Related guides

Source: Cover Forge USA editorial team|Last verified: May 2026|Methodology
Definitions are educational and may be simplified. Always refer to your policy contract and consult a licensed agent for terms that affect coverage decisions.
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Cover Forge USA Editorial Team

Editorial Lead

This article was researched and written by the Cover Forge USA editorial team against federal sources (NAIC, CMS, FEMA, DOL, SSA, state DOIs) and standard policy forms. Bylines organize content by topic — they do not assert individual licensure. See our editorial-policy for details.

Reviewed June 2026

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