A Flexible Spending Account (FSA) is primarily used for what purpose?

A Flexible Spending Account (FSA) is primarily designed to allow employees to set aside pre-tax dollars to pay for qualifying medical expenses. This pre-tax benefit effectively reduces taxable income, allowing employees to use their funds to cover various out-of-pocket health costs, such as copayments, deductibles, and certain medications, without incurring federal payroll taxes.

The mechanics of an FSA can lead to significant tax savings, making healthcare expenses more affordable and accessible. The flexibility of the fund allows employees to decide how much to contribute within established limits, plan for anticipated medical expenses, and spend the funds on eligible healthcare services throughout the plan year.

Contextualizing the other options, saving for retirement typically involves different accounts like 401(k)s or IRAs, which serve a distinct purpose compared to FSAs. Additional salary bonuses could come in various forms but are not related to the pre-tax medical expense nature of FSAs. Similarly, while accumulating sick leave is a part of employee benefits, it specifically relates to paid time off rather than managing healthcare expenses. Thus, the primary role of an FSA centers on facilitating the payment of health-related costs in a tax-advantaged manner.