What is one feature of a Flexible Spending Account (FSA)?

One key feature of a Flexible Spending Account (FSA) is that contributions are made with pre-tax dollars. This means that the money you contribute to an FSA is deducted from your paycheck before federal income taxes are applied, which effectively lowers your taxable income. As a result, individuals can benefit from tax savings while using these funds for eligible medical or dependent care expenses.

This pre-tax feature makes FSAs an attractive option for employees looking to manage healthcare costs more effectively. However, it's important to note that the funds in an FSA typically do not rollover indefinitely; rather, they are subject to a “use-it-or-lose-it” rule, which requires participants to use the funds within the plan year or within a brief grace period, if offered. Contributions are also not taxable; they provide tax advantages rather than being subject to taxes, and employers are not required to match contributions to FSAs, making the correct answer to the question particularly relevant.