There are typically two types of FSAs offered by employers – – one for dependent care expenses and one for medical expenses.  In both cases, the employer deducts pre-tax dollars from an employee’s pay to be used for approved medical or dependent care expenses.  The biggest drawback is that if you do not use the money by the end of the benefit year, you lose your money.  In recent years, changes such as claims deadline extensions and benefit “loans” have made FSAs more appealing but there are still several drawbacks.

For more details on how an FSA may help you read, “What You Need to Know About FSAs.”