THE BENEFITS AND DRAWBACKS
OF USING
FLEXIBLE SPENDING ACCOUNTS:
A SHORT REPORT
July 6, 2017
Prepared for:
R&R Consulting Services
Prepared by:
Rivka Mashinsky
BUS105
Background:
R&R Consulting Services, in the past, did not offer any flexible spending accounts (FSA)
to their employees. Now they decided to look into it to verify if they should start
offering it.
An FSA is a flexible spending account that an employer offers to an employee. The
employee can choose to take off a certain amount of his earnings and puts it into a
special account that is used for certain allowed expenses. This money is tax free.
There are numerous advantages and disadvantages involved in using such an account.
Within this research I listed all the advantages, disadvantages and my recommendation.
Advantages:
An FSA enables the employee to save up to 30% on health care and/or dependent
expenses by taking off money from the employees’ gross income before taxes are paid
(TASC). This leads to the employee having a tax saving. The employer also saves money
on FICA and FUTA taxes by not having to pay taxes on the wage contributions.
An FSA also helps employees save for health expenses for the year. It lets the employee
put away for health expenses before spending the money for other expenses.
Moreover, with this plan the account owner can avoid particular little expenses, it, lets
the employee purchase over the counter drugs and the person also doesn’t need to
