What is a key feature of a flexible spending account?

A key feature of a flexible spending account (FSA) is that funds must be spent within a specific period, typically by the end of the plan year. This means that employees have a limited timeframe to use the contributions they have made to the account for qualified medical expenses. If the funds are not used by the end of this period, they are forfeited, making timely spending essential for account holders. This characteristic sets FSAs apart from other types of accounts, such as Health Savings Accounts (HSAs), which allow funds to roll over from year to year.

The requirement that funds be spent within a specific timeframe encourages participants to plan for their healthcare expenses, ensuring that they maximize the benefits of the account while also managing their financial resources effectively.