Majority of employees draw significantly from their FSAs

New research exploring the usage of FSAs suggests that the vast majority of workers take distributions from their accounts. In a brief titled “Findings from EBRI’s Flexible Spending Account Database, 2020” the Employee Benefit Research Institute used information from its database, which includes over 1.9 million FSAs, to explore how employees and employers use FSAs, which allow workers and employers to set aside money to be used on out-of-pocket health care costs. They found that 89% of employees with an FSA took a distribution from the account in 2020, with the average distribution coming in at around $1,287. That figure was on-par with the average contribution of $1,265.

Related: Important facts about flexible spending accounts (FSAs)

The new brief from the EBRI suggests that there is no significant difference between how employees contribute to and use these different types of FSAs. There were, however, notable differences between how workers used standard FSAs compared to limited-purpose FSAs, or LPFSAs. LPFSAs, which can only be used for certain vision and dental expenses, saw an average contribution of only $859 compared to $1,259 for traditional FSAs, and only 74% of contributors took a distribution from the account.

The new brief also chronicled employer contributions to FSAs, finding only around 7.7% of accounts received employer contributions, which averaged $299.

The age of workers also affected how FSAs were used. Contributions and distributions both generally increased with age, with older workers more likely to contribute to their FSAs and to take distributions. For example, while only 57.5% of workers under the age of 25 took a distribution, 92.7% of 55- to 64-year-olds did.

In the report, EBRI research associate Jake Spiegel notes, “While it is encouraging that older workers stretched their health care dollars further with higher average contributions and more frequent distributions, younger workers had relatively small contributions, and little more than half took a distribution from their FSA. This is perhaps indicative of a knowledge gap and may hinder a worker’s financial wellbeing.”