Health and Wellness Benefits

Flexible Spending Accounts

A Health Savings Account (HSA) is a pre-tax benefit account that allows employees to pay for certain out-of-pocket health care costs, tax-free.

A Dependent Care Flexible Spending Account (DCFSA) or dependent care reimbursement account, is a pretax benefit account used to pay for eligible dependent care services, such as child care, preschool, and before or after school programs.

A Dependent Care Expense Accounts (DCEA) is similar to a Dependent Care FSA; however, a DCEA covers child care and other expenses for dependents, such as care of elderly or disabled relatives.

Employers can contribute money to all three of these accounts for their employees in addition to having the accounts available for employees to contribute to directly.

Benefits to Employers^{Footnote # 1}

Increases productivity
Reduces payroll taxes
Improves recruitment
Increases retention, reducing turnover costs
Eases administration Improves morale

Benefits to Children^{Footnote # 2}

Improves health, through increased access to health care, including primary care, dental care, needed healthcare services, mental health care, prescriptions, preventive care, treatment for chronic conditions, prenatal care (for mothers)
Improves education and cognitive development by making child care more affordable

Benefits to Parents/Families^{Footnote # 3}

Improves health, through increased access to health care, including greater access to primary care, preventive screenings, ambulatory care, prescription medications, and chronic disease care; greater medication adherence; and higher rates of diagnosis
Reduces stress
Improves work/life balance
Reduces depression
Improves self-reported health
Improves family economic security

Research or Recommendations from National Organizations

Employers who want to set up a health flexible spending account should:^{Footnote # 4}

Understand the benefits and the risks. Tax savings and the ability to write off some administrative costs as normal business expenses make FSAs attractive to employers. However, employers should understand rules around reimbursing expenses, which can bring some risk.
Get help. Employers should use a third- party administrator to establish and manage accounts. Record-keeping requirements can be extensive, and third- party administrators are relatively low cost. Plus, having an external administrator protects potentially sensitive employee health information by keeping that information away from coworkers.

There are four options to help you set up FSAs for employees:

Use an online software that also offers FSA benefits. This is best if you’re currently only doing payroll and want to add benefits with little additional expense.
Contract with a professional employer organization, which allows you to give your employees benefits similar to those of a large company.
Work with a private insurance broker that offers FSAs along with health insurance.
This is best if you’re already working with a broker and don’t mind doing administrative work. Brokers likely won’t manage enrollment paperwork and payroll deductions.
Use a large insurance carrier, who also can help manage FSAs. This works best if you use a large healthcare company to provide your health insurance. You can ask your carrier to add on an FSA option.

Often, employees who do not sign up for a flexible spending account or dependent care account do not participate because they are confused about the benefit or unaware of it. Below are some guidelines to help educate employees on the benefits of each account.

For FSAs:

Healthcare.gov

For dependent care accounts:

Range of Practices in the United States

An estimated 47 percent of all workers in private businesses have access to an FSA. But high-income employees and employees in larger firms are more likely to have access, with nearly one in four low-income workers having access compared to seven in 10 high-wage earners. ^{Footnote # 5}

According to the Bureau of Labor Statistics, forty-six percent of all workers in private businesses have access to a dependent care reimbursement account. Again, this benefit is much less likely to be offered to low-income workers or workers at smaller businesses. ^{Footnote # 6}

In 2026, the combined employer/employee pre-tax contribution is $7,500/year to a DCFSA for qualified expenses such as child care and after school programs. ^{Footnote # 7}

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Case Study

Business Smart: The Economic Development Partnership of North Carolina

As the leading economic development organization in our state, the Economic Development Partnership of North Carolina (EDPNC) supports and counsels businesses, large and small, to succeed. The organization works with the public and private sectors at state, regional and local levels to pursue sustainable job-creation and investments.

Core to its mission is to improve the economic well-being and quality of life for all North Carolinians. Living this mission takes shape both inside and outside the organization.

EDPNC’s workplace is family friendly, ensuring that its more than 70 employees across the state can meet their family and workplace responsibilities. Among its family friendly benefits, EDPNC offers paid parental leave, an Employee Assistance Program, a Dependent Care Flexible Spending Account and hybrid, remote work options.

The organization also recognizes the value of family friendly workplaces to our state’s reputation. Chris Chung, EDPNC’s CEO, believes that the wide adoption of family friendly benefits can create a more engaged and productive workforce, which in turn builds our state’s reputation as a great place to do business and where employees feel they have a better balance in their work and family life.

CEO and EDPNC employees share their thoughts and experiences in working for a family friendly organization.