A Flexible Spending Account is designed to help employees who know in advance they are likely to have significant out-of-pocket expenses for medical and/or dependent care.
FSAs encourages employees to save for future needs by letting them contribute pre-tax dollars – the more they contribute, the less they pay in payroll taxes.
It is important that employees accurately estimate their anticipated expenses. While the money employees set aside is pre-tax dollars, unused funds are forfeited at the end of the year.