Q: We have an employee who is thinking about participating in our health FSA. She heard that it might impact her Social Security benefits. Is that true?
A: A health FSA is a reimbursement plan. Employees contribute to the plan, on a pre-tax basis, and the elected contribution is available for reimbursement of eligible medical expenses.
Since amounts are contributed to the plan on a pre-tax basis, health FSA participation does lower salary for Social Security computation purposes. It is possible that the employee’s future Social Security benefit will be less than what it would be if the employee did not contribute to the health FSA.
