Benefits Buzz

Employees Aren't the Only Ones Who Save with an FSA

Posted on May 13th, 2021

Everyone knows that Flexible Spending Accounts (FSAs) save employees money on healthcare and dependent care expenses. But did you know that FSAs save employers money as well?

FSAs are one of the few benefits an employer can provide that often pays for itself—and then some! While there are expenses that will be incurred by the employer when using a third-party administrator for the FSA, there are also payroll tax savings that will offset some or all those expenses.

The Federal Insurance Contributions Act (FICA) established a payroll tax imposed on employees and employers to fund Social Security and Medicare. FICA taxes amount to 15.3% of the employees’ wages, but the tax is split equally between the employee and employer. The employee is assessed a 7.65% tax, and the employer is also assessed a 7.65% tax. 

However, a key feature of FSAs is that contributions are not subject taxes, including FICA taxes. Not only does the employee save taxes on their contributions, but the employer also reduces their FICA tax liability by offering an FSA. In many instances, the tax savings to the employer are equal to or greater than the administrative expenses associated with an FSA.

The more employees who participate in the FSA, the more the employer saves. Check out our FSA Employer Savings Sheet to see how it works.

It’s hard to make an argument against offering an FSA. How many benefits are there that not only pay for themselves, but can actually make an employer money? We know at least one that does!


Contact a Flex Sales Consultant to discuss your FSA strategy or request a proposal to get started offering an FSA today!

888-354-7990 Option 4



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