Essay on Flexible Spending Account (FSA): Money Savings for Healthcare Expenses

Introduction

Flexible Spending Account (FSA) refers to a specific account that allows money to be collected and be saved for the account owners of consumers to give or pay for specific out-of-pocket financial charges concerning healthcare. Giving them money for FSA is not obligated to the account owners or the consumers. Being free will provide money; FSA can be considered as one of the main advantageous monetary accounts within the US, which can be established using any cafeteria related scheme for a vast number of employees. Other agencies refer to FSA as a reimbursement account or Flexible Spending Arrangements (Cardon, 47). However, it most presumably considered as Medical flexible spending account. The paper focuses on establishing the various advantages and disadvantages of having Flexible Spending Accounts in place. Is FSA a fine thought for workers and trade?

Is your time best spent reading someone else’s essay? Get a 100% original essay FROM A CERTIFIED WRITER!

Save 25%

From the definition of FSA, it may be difficult to establish whether its existence can be extended at a trade level. However, FSAs do not qualify to be fine thought for workers or any trade due to the difference in their health necessity for each equivalent organization. FSAs are dependent on several factors that are inhibited for a given organization. Some common facets realized when dealing with FSAs is the organizational climate. Climate for a given organization helps define whether a given organization is situated in a safe environment or within a polluted environment. Other factors include the overall earnings of the employees. Establishing whether the workers are willing to open an FSA account or not is essential by observing both the trade and the worker about FSA (Hamilton, 474).

Most organizations are located in regions that have polluted the atmosphere due to the presence of factories and industries or even in places where there is high traffic. In most areas characterized by high traffic and industrialization, the incidents of accidents tend to increase. In such cases where the probability of having accidents is high, organizations may call for Flexible Spending account needs. Contrary, organizations operating in regions having little or no atmosphere pollution or generally having to low an accident incident level do not necessarily adopt an FSA.

Moreover, the magnitude of an organization is a crucial determinant of whether FSA should be adopted or not. The scale and organization's operation plays a significant role in determining the feasibility of adopting FSA within an organization. Organizations running in small scale dimensions can quickly implement FSA due to a finite number of participants. However, organizations operating at a significant scale finds it challenging to achieve a Flexible Spending Account due to management issues. This makes it difficult to conclude the hypothesis of whether it is essential to have FSA in place. Due to the nature of necessity difference, it becomes difficult to have a universal stand on the essentiality of FSA implementation. The determinant factors act as a limiting factor by determining under which circumstances an FSA can be established. It can, however, be concluded based on the size of the business and the likelihood of an accident occurring. The total earning of the trade a worker gets and the location of the firm is, therefore, the main issues that determine whether FSA is needed or not.

Advantages of FSA Account

Assuming the LMN company currently has not established an employee FSA scheme yet, different dimensions can be used to develop the advantages of having an FSA scheme. LMN company specializes in fast food production. The manager can, therefore, present the various benefits which can be realized alongside the disadvantages of having an FSA scheme. From the presentation of advantages and disadvantages, the boss or the executives can choose whether it is feasible enough from the underlying circumstances.

Flexible Spending has a vast number of advantages for the workers and the organization at large. The various benefits discussed can be used to form a basis on whether an organization should adopt FSA. Take-home salary being given to employees is usually higher. Consequently, taxable income for a worker is often significantly reduced because workers have reimbursement fees, which is not subjected to federal tax, State, and FICA preservation (Hamilton, 474). Workers are entitled to participating in FSA contributions using any scheme of their choice. Having flexibility in charge of health insurance premiums helps in attracting workers to contribute to the program potentially. Any payment being made to any FSA scheme allows flexibility of up to $5.00 or within every reimbursement time.

Advantages

Pre-tax accounts are essential mostly to the employees who save their money at different times. Such payment can be an outstanding escape plan at times of paying for services such as health care for the employees (Cardon, James, 50). They can also be an excellent way to pay daily attention to the children belonging to the employees. The following are the advantages and disadvantages of flexible spending accounts (FSA).

FSA helps to minimize the taxable income legally to the workers. Paying taxes is a responsibility entitled to every worker, and using the accounts, it does not mean that an employee evades paying the taxes. The money spends, or the amount that withholds after paying the workers, is mostly not accounted in the IRS (Cardon, James, 49). It means that the overall amount that the employees can pay, deposit, or use is reduced.

The employees who use flexible spending accounts are not limited to the amount of work they do. The accounts allow and authorize the employees to perform their tasks to the maximum, and their capability (Cardon, James, 50). The sole reason as to why the employees using the FSA are allowed to do the tasks is to enable them to generate more capital for taking care of the elderly or for childcare.

The use of FSA allows employees to use money that exceeds the fixed expenditure. If a worker is in a position to use the fixed sum purposed to be spent in a year within only a day, they can be compensated (Cardon, James, 51). The FSA allows the carrying on of the used money to the following year. The carrying on of the expenditures does not mean that the employees are expected to start playing right away. The workers using the FSAs can have an extension in the payment and can pay the money over a moderated period.

Also, the FSA paying scheme of the expenditures carried on to the next years can be given a considerable grace period before the employee is requested to repay. The employees who use the FSAs are granted a grace period of two and a half month's extension after the completion of the year that the worker had applied to commence repaying terminates (Cardon, James, 52). An employee is not pinned to the wall provided they use a Flexible Spending Amount.

Disadvantages of FSA

The FSA has a unique definition; Dependent Care. The description suggests that the employees are not cared for in the decision they make. They can either use or lose the accounts. On several occasions, the unused funds belonging to employees would be lost after the completion of the year. The organization would absorb the employees who do not make use of the FSA also would lose their funds or the funds once a year completes (Leight, Jessica, and Nicholas, 7). Some workers fail to acknowledge all these, and in return, the employees may refuse to have an FSA.

As much as the use of FSA does extend to some household members, an employee is supposed to be competent tax-dependent personnel. The expenditure of the money allocated to a worker because of using the FSA extends to home partner, spouse, any tax reliant, and to self. Through this, it limits the use of the funds allocated to the employees in times of need (Leight, Jessica, and Nicholas, 8). The case should be evaluated and extend to the beneficiaries of the funds.

The advantages achieved by the use of FSA are limited when it comes to the administration of particular wages. The wages of social security personnel are defined in multiple ways as the plan does not have any measures concerning retirement schemes. Also, when an employee enrolls and starts using FSA, making alterations might tend to be hard (Leight, Jessica, and Nicholas, 8). Adjustments would be allowed on occasions such as an employee's family status changes. Otherwise, alterations do not occur and would have to wait until the plan year of FSA completes.

The FSA tackles child care. Most workers spend most of the allotted funds to deal with child care. The workers opt to use the money from the FSAs to accomplish child care expenditures. Through taking care of the child seems to be among the best things achievable by the employees who cherish the use of FSAs until in occasions of taxation. It can result in the employees to lose their tax credits of their children after the taxes are filed (Leight, Jessica, and Nicholas, 9). If the workers direct the use and benefits attained after the use of FSA to child care could be wasteful. The tax credit of the children would act as a source for saving and accumulating taxes. The taxes would be unable to experience any tax benefit as all would be directed to child care.

The employees at the fast-food company are subjected to health problems in diverse ways, either by consuming the foods or were subjected to health problems during the preparations of the fast foods. They would, therefore, feel a massive burden in losing FSA funds as they would have helped to overcome in the LMN organization (Leight, Jessica, and Nicholas, 9). The workers at the fast-food company would require to have a difficult health minimum per year.

Conclusion

Flexible Spending Accounts have associated advantages and disadvantages; however, several aspects have to be considered before being integrated into a business environment. Several issues need to /be considered before establishing FSA operations in an organization. As observed earlier, the location and workers' earnings are vital determinants when assessing the feasibility of FSA. A trade-off between the two contradicting benefits and drawbacks have to be established to come up with a clear plan. Also, observing the company scale constraint is essential for management implication.

Works Cited

Cardon, James H. "Status quo bias in flexible spending account usage." Journal of Behavioral and Experimental Economics 81 (2019): 47-55. https://www.sciencedirect.com/science/article/pii/S2214804318305214

Cardon, James H. "Status quo bias in flexible spending account usage." Journal of Behavioral and Experimental Economics, vol. 81, 2019, pp. 47-55.

Hamilton, Barton H., and James Marton. "Employee Choice of Flexible Spending Account Participation and Health Plan." SSRN Electronic Journal, 2008, pp. 474-551.

Leight, Jessica, and Nicholas Wilson. "Framing Flexible Spending Accounts: A LargeScale Field Experiment on Communicating the Return on Medical Savings Accounts." Health economics (2019): 5-10. https://onlinelibrary.wiley.com/doi/abs/10.1002/hec.3965?casa_token=OdE6LVpBqSAAAAAA:TEPjYg-OSOURdJVWC7KtSObP7o54wHAeFYbeacyNOgD-aI-hNRHMYSgjiDOPNfs-lNOMTRCOR7du59VrkQ