Flexible spending account (FSA) plans enable employees to set aside money, on a pre-tax basis via salary reduction, to pay for certain expenses. Two types of spending accounts are permitted under Section 125: Medical FSA and Dependent Care FSA. Under a Medical FSA employees are reimbursed for eligible health care expenses that are not reimbursed by any other plan. Typically, these include deductibles, co-payments and uninsured expenses, such as dental expenses, eyeglasses or hearing exams as well as any other medically necessary items that are not covered by insurance. Under a Dependent Care FSA, employees can be reimbursed for qualified dependent care expenses that are incurred so that they may continue to work instead of having to provide the care themselves. Eligible expenses include a babysitter, daycare, after-school programs and day camp. The expense must be incurred while the employee and their spouse are working. Dependent Care Reimbursement is only available for the care of children under the age of 13 or a spouse or dependent who is unable to care for themselves.
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