What is a Flexible Spending Arrangement (FSA)?
A Flexible Spending Arrangement (FSA) is a special account you set up with pre-tax contributions to use for medical or dependent care expenses. These contributions are not included in your taxable wages reported on Form W-2. As expenses are incurred you can pay from or be reimbursed from your FSA account.
Amounts contributed to an FSA are not subject to federal income tax, Social Security tax or Medicare tax, allowing your medical or dependent care expenses to be paid with pre-tax rather than after-tax income.