Flexible Spending Accounts (FSAs) are usually funded by you through voluntary pre-tax payroll deductions. No federal income tax, FICA (Social Security and Medicare) tax and in most states, state income tax deductions, are taken from these contributions. 

FSAs are established to pay for specific health care expenses that are not reimbursed by a group health plan such as eyeglasses, dental work, deductibles and co-payments. Your expenses and the expenses of your spouse, dependent children, and any other qualified tax dependent can be paid for using your flexible spending account. 

Employers may offer FSAs as part of a cafeteria plan and have complete flexibility to offer various combinations of benefits in designing their plan. Based on previous IRS regulations, contributions remaining at the end of the plan year were forfeited under the IRS "use it or lose it" rule.

Even though the IRS has extended the allowable period to beyond the end of the plan year, the "use it or lose it" rule remains an integral component of any FSA. Employers must amend their plans to include the time extension beyond the end of the plan year now permitted by the IRS. The extension is not automatic. At the end of the extension period, unused funds are still forfeited.

Some employers may even contribute to the FSA, but this is not an IRS requirement. So that requests for reimbursement can be paid, employers must receive verification of the medical claims. You do not have to be covered under the employer/sponsor's health care plan, or any other health care plan to participate in an FSA.

Self-employed persons are not eligible for an FSA. 

Caution: Health care FSAs also are referred to as "tax free spending accounts," "medical reimbursement accounts (MRAs)," and even "health care spending accounts (HCSAs or HSAs)". Don't be confused by the inconsistent terminology.