Flexible Spending Account

Reduce administrative expenses while increasing employee satisfaction

The Visa Flexible Spending Account (FSA) card is a convenient way for employees to access the pre-tax funds they have set aside in either a Healthcare FSA or Dependent Care FSA. In the case of Healthcare FSA, these expenses include co-payments, deductibles, prescriptions, and other out-of-pocket expenses not covered by healthcare plans. Dependent Care FSA expenses include childcare or adult dependent care expenses. The card reduces the paperwork associated with accessing funds in these FSAs and ensures that employees don’t have to pay out-of-pocket and then wait for reimbursement when they pay for covered expenses.

How it works

The Visa FSA card makes it easy for employees to access pre-tax income to pay for eligible medical and dependent care expenses. Employees receive their FSA cards after enrolling in an FSA plan through their employer at the start of the plan year. Each pay period, a predetermined amount (subject to IRS maximums for dependent care and employer maximums for healthcare) is deducted from employees’ pre-tax wages and credited to their FSA.

Employees use their cards to pay for out-of-pocket expenses, such as co-payments, prescription drugs, and deductibles for medical and dental treatments. And with a dependent care plan, pre-tax funds can be used to pay for eligible expenses for dependents, such as childcare and elder care. When employees incur an eligible expense, they present the card to the merchant, doctor, pharmacy, or other qualified service provider, and the funds are deducted automatically from their FSA. All transactions may be documented on monthly electronic or optional printed account statements.

Card features

• Multi-purse capability. Visa’s flexible platform supports FSA programs offered individually or “stacked” with Health Savings Accounts (HSAs) and/or Health Reimbursement Arrangements (HRAs), all of which can be accessed with a single, multi-purse Visa card.
• One-card solution. Visa FSA cards may be combined with health insurance identification cards for a convenient “one-card” solution.
• Co-branding capabilities. The Visa FSA card may be co-branded with name/logo of an affinity/co-branding partner.

Benefits

For Employers
Benefits of the Visa FSA card:

• Increased employee participation. Adding a Visa FSA card as a tool to provide easy access to funds can help increase employee participation. With FSAs, employers within the industry claim a 20 to 40 percent increase in employee participation when cards are added to FSA plans.¹
• Reduced administrative costs. The card makes the reimbursement process less cumbersome, reducing the number of—and the cost of processing—paper claims and the need to issue reimbursement checks to employees.
• Account tracking. The Visa FSA card makes it easy to track FSA account expenditures. In addition, Visa’s Auto-Substantiation Solution can also help eliminate “pay and chase” and make using Visa FSA/HRA cards easy and more cost-effective for merchants, FSA/HRA plan participants, and benefit administrators than first-generation health benefit cards.

General FSA benefits:

• Reduced FICA taxes. Employers do not pay Federal Insurance Contributions Act (FICA) taxes on employees’ pre-tax FSA contributions.
• Recruitment and retention assistance. FSAs are a positive addition to benefit packages and can act as an employee recruitment and retention tool.

For Administrators
Benefits of the Visa FSA card:

• Value. Choosing Visa ensures flexibility, enhancements, and greater options.
• Streamlined claims process. Adding a Visa FSA card improves the claims process and reduces administrative paperwork.
• Reduced costs. The card makes the reimbursement process less cumbersome, reducing the number of—and the cost of processing—paper claims and the need to issue reimbursement checks to employees.
• Account tracking. The Visa FSA card makes it easy to track FSA account expenditures. In addition, Visa’s Auto-Substantiation Solution can also help eliminate “pay and chase” and make using Visa FSA/HRA cards easy and more cost-effective for merchants, FSA/HRA plan participants, and benefit administrators than first-generation health benefit cards.

For Consumers
Benefits of the Visa FSA card:

• Convenient access to FSA funds. Enables employees to access funds directly from their FSA card without worrying about having funds on hand to cover the co-payment appointment or a prescription.
• Reduced paperwork. The lack of reimbursement claims significantly reduces or eliminates paperwork, helps employees make better use of their accounts, and reduces incidents of funds forfeiture.
• No waiting for reimbursements. Eliminates waiting for reimbursements, because Visa FSA cards deduct funds directly from employees’ FSAs.
• Visa consumer protections. Visa’s Zero Liability Policy protects employees from unauthorized purchases if their card is lost or stolen; cards can be replaced with the full amount of unauthorized transactions.² Transaction-dispute rights also apply.

General FSA benefits:

• Tax advantages. Employees fund their FSAs with pre-tax salary reductions. Pre-tax salary reductions are not subject to Federal (and in many cases state) income tax.
• Full value of FSA funds available from day one. Employees are able to draw on the full value of their FSA annual election on the first day of the plan, even if they have not fully funded the account.

About Flexible Spending Accounts

The FSA is an employer-provided benefit, designed to make healthcare and/or dependent care more affordable by allowing employees to set aside a portion of their pre-tax wages to pay for “qualified medical expenses.” Employers offer FSAs to their employees as part of their benefit plan. Participation by employees is voluntary.

Because the IRS limits the use of FSA funds to eligible healthcare- and dependent care-related expenses, the use of Visa FSA cards is restricted to IIAS (Inventory Information Approval System) participating merchants and/or based on Merchant Category Codes (MCCs). Cards can be used for Internet and mail-order/telephone-order purchases of qualified medical products and services. Visa FSA cards cannot be used to access cash.

FSAs are subject to specific federal rules and requirements, including:

• Annual contribution limits
• Annual employee reenrollment
• Forfeiture of unused employee funds if employees do not use the funds within the plan period

Get more information

To learn how you can add Visa Healthcare cards to your benefits program, start with our Partner Directory. For more information on FSAs, please visit www.irs.gov.