Which statement describes FSAs?

• A. They are government-run programs.
• B. They are employer-sponsored accounts that use pre-tax dollars to pay for qualified medical expenses.
• C. They are funded by post-tax dollars only.
• D. They require no employer involvement.

Answer: (B)

FSAs are accounts created by an employer that let employees set aside pre-tax dollars through salary deductions to pay for qualified medical expenses. The money is contributed before taxes, reducing taxable income, and can be used to reimburse eligible medical costs incurred during the plan year (with possible carryover or grace period depending on the plan). They’re not government-run programs, and they rely on employer involvement to establish and manage the account. They’re specifically funded with pre-tax dollars, not post-tax, and require the employer to sponsor and administer the plan.