What are the advantages of a FSA?
FSAs offer significant tax advantages. For employees any amount they contribute is exempt from federal income, state income, or FICA taxes. Employers are exempt from paying FICA taxes on the salary contributions and FUTA taxes because the employee’s salary is slightly reduced. • Employers are able to offer a low-cost benefit that meets essential needs of their employees such as childcare. • Most employers generate significant FICA tax savings on contributions made to a FSA plan to the point of providing the plan arrangements at no cost to the employer. • No other type of a cost-sharing plan can provide the same level of dependent care tax savings.
