What happens to the money that an employee puts into the FSA Plan?
The employee’s redirected salary is “banked” by the employer in an account maintained for the employee. Qualified expenses incurred by the employee are reimbursed tax-free from dollars “banked” in the account. If the full amount is not used by the employee before the end of the plan year, the left over amount is forfeited to the employer. Every effort is made to educate the employees on this risk and to be conservative in their estimates of eligible expenses. As a result, it is our experience that forfeitures are minimal, if any.
