Home > Glossary > Flexible Spending Account

Meaning / Definition of

Flexible Spending Account

Categories: Retirement and Pension, Personnel Management,

Some employers offer flexible spending accounts (FSA), sometimes called cafeteria plans, as part of their employee benefits package. You contribute a percentage of your pretax salary, up to the limit your plan allows, which you can use to pay for qualifying expenses. Qualifying expenses include medical costs that aren't covered by your health insurance, childcare, care for your elderly or disabled dependents, and life insurance.The amount you put into the plan is not reported to the IRS as income, which means your taxable income is reduced. However, you have to estimate correctly the amount you'll spend during the year when you arrange to have amounts deducted from your paycheck. Once you decide on the amount you are going to contribute to an FSA for a year, you cannot change it unless you have a qualifying event, such as marriage or divorce.If you don't spend all that you had withheld within the year - or in some plans within the year plus a two-and-one-half month extension - you forfeit any amount that's left in your account.In some plans you pay for the qualifying expenses and are reimbursed when you file a claim. In other plans, you use a debit card linked to your account to pay expenses directly from the account.

Featured term of the day

Definition / Meaning of

Roth 401(k)

Categories: Retirement and Pension,

The Roth 401(k) retirement plan, which was introduced in 2006, allows you to make after-tax contributions to your account. Earnings may be withdrawn tax free, provided that you are at least 59 1/2 and your account has been open five years or more.Both the Roth 401(k) and the traditional 401(k) have the same contribution limits and distribution requirements. You can add no more than the annual federal limit each year, and you must begin taking required minimum distributions (RMD) by April 1 of the year following the year you reach age 70 1/2. You can postpone RMDs if you are still working.You may not move assets between traditional and Roth 401(k) accounts, though you may be able to split your annual contribution between the two. If you leave your job or retire, you can roll Roth 401(k) assets into a roth ira, just as you can roll traditional 401(k) assets into a traditional ira.Most 401(k) plans, including the Roth, are self-directed, which means you must choose specific investments from among those offered through the plan.

Most popular terms

1. Family Of Funds
2. Audit Committee
3. Nonprofit
4. Structured Product
5. Building Ordinance Coverage
6. Additional Insured
7. Home Equity
8. Price-to-earnings Ratio (P/E)
9. Special Crime Insurance
10. Direct Action

Search a term

Keyword:

Browse by alphabet

ABCDEFG
HIJKLMN
OPQRSTU
VWXYZ#

Browse by category

Accounting
Banking
Bankruptcy Assistance
Bonds and Treasuries
Brokerages
Business and Management
Compliance and Governance
Credit and Debt
E-commerce
Economics
Estate Planning
Forex
Fraud
Fundamental Analysis
Futures
Global
Insurance
International Trade
Investing and Trading
Ipos
Legal
Loan and Mortgage
Mergers and Acquisitions
Mutual Funds
Operation and Production
Options
Patent
Personnel Management
Real Estate
Retirement and Pension
Statistics and Risk Management
Stocks
Strategies
Tax
Technical Analysis
Venture Capital