FSA & DCAP

An FSA (Flexible Spending Account) is a benefit offered by employers that allows employees to set aside pre-tax dollars to pay for eligible healthcare expenses, such as medical, dental, vision costs, and prescriptions. Contributions to an FSA reduce taxable income, making it a cost-effective way to manage out-of-pocket expenses. However, FSAs are typically "use it or lose it," meaning funds not used by the end of the plan year may be forfeited, unless the plan includes a grace period or rollover option.

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A DCAP (Dependent Care Assistance Program) is another type of employer-sponsored account that enables employees to use pre-tax dollars to cover eligible dependent care expenses. These may include daycare, preschool, before- or after-school care, or elder care, for dependents who require care while the employee works. Like FSAs, DCAPs help reduce taxable income, but funds are also subject to annual limits and must be used within the plan year.