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ARTICLE · 18 JULY 2022

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Parsons Behle & Latimer
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As a small employer, can we offer employees a flexible spending account (FSA) if we don't offer a medical plan?

United StatesEmployment and HR
Jason R. Mau
Jason R. Mau

Flexible Spending Account (FSA) Options for Small Employers

Q. As a small employer, can we offer employees a flexible spending account (FSA) if we don't offer a medical plan?

A. Unfortunately, you cannot. In fact, no employer can offer an FSA without offering a medical plan. The Affordable Care Act (ACA) sets forth various market reforms that impact group health plans. Because FSAs are considered group health plans, they are subject to such market reforms—unless they qualify as "excepted benefits." Excepted benefit plans are exempt from market reforms and provide limited health coverage. Plans of this type include dental insurance, vision insurance and certain FSAs.

To qualify as an excepted benefit, an FSA must satisfy certain requirements, one of which being that other medical plan coverage, not limited in scope to excepted benefits, is offered to all FSA participants. Whether your employees actually enroll in the group health plan does not matter; it is

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