Flexible Spending Accounts (FSA) definition

A tax-efficient way for employees in the United States to set aside part of their salary to pay for qualified expenses, most often medical expenses. The deductions are made gross, before payroll taxes are applied. One of the biggest disadvantages is that any funds not used up by the end of the plan year are lost, which makes flexible spending accounts (FSA) most suitable when employees know when they have expenses and can then plan accordingly.