Following the deep dive on HSAs, this episode tackles the other side of the alphabet soup: FSAs (Flexible Spending Accounts) — the benefit that sounds helpful, looks simple, but often leaves employees frustrated and employers exposed.

Tom Quigley breaks down exactly what an FSA is, how it works under the tax code, where it makes sense, and where it absolutely does not. He also explains why FSAs were once popular, why HSAs largely replaced them, and why employers must stop blindly offering FSAs without education.

This is a practical, no-BS episode that helps employers and employees avoid costly mistakes — especially as healthcare costs surge in 2026.

Tom starts with the basics:

• An FSA operates under Section 125 of the Internal Revenue Code

• Employees elect an annual amount to contribute

• Contributions are taken pre-tax via payroll

• Funds can be used for eligible medical expenses

• Unused funds are forfeited at year-end (“use it or lose it”)

2026 limits discussed:

• Healthcare FSA: up to ~$3,400

• Dependent Care FSA: up to $7,500

Tom makes the distinction crystal clear:

Tom:

“FSAs look good on paper. HSAs work in real life.”

The core problem: prediction.

• Employees must guess their healthcare spend a year in advance

• Most people overestimate or underestimate

• Unused funds are lost

• End-of-year panic spending ensues:

  • Glasses

  • Dental work

  • Anything just to not lose the money

Tom:

“They’re not saving money — they’re racing the calendar.”

Tom is clear: FSAs aren’t useless — they’re just misused.

✅ Best use case: Dependent Care FSAs

• Daycare expenses are predictable

• Pre-tax savings are significant

• Great benefit for working parents

❌ Worst use case: Healthcare FSAs

• Medical spending is unpredictable

• Creates stress and waste

• Inferior to HSAs in nearly every way

This is a point most employers don’t realize:

• Employees can use the full FSA amount immediately

• Even if it hasn’t been fully funded yet

• If an employee leaves mid-year after spending the funds:

  • Employer eats the loss

Tom:

“That risk never gets talked about.”

Yes, employers save payroll taxes — but they also assume risk.

Tom’s recommendation is consistent:

• Offer HSAs for healthcare

• Pair with high-deductible plans

• Educate employees properly

• Allow Dependent Care FSAs only, when applicable

Tom:

“If there’s no dependent care, skip the FSA.”

Tom estimates current usage trends:

• ~75% HSA

• ~25% FSA

Why?

• HSAs don’t punish mistakes

• HSAs build long-term value

• HSAs reward discipline, not guessing

Neil raises an important reality:

“Most employees live paycheck to paycheck.”

Tom explains:

• FSAs don’t actually change take-home pay dramatically

• But they lock employees into rigid commitments

• HSAs allow flexibility:

  • Fund monthly

  • Fund when expenses arise

  • Fund retroactively before paying a bill

Tom points out another issue:

• Employees are overwhelmed by acronyms:

  • FSA

  • HSA

  • HRA

  • MERP

• Agents use jargon without understanding it themselves

Tom:

“I don’t use acronyms with clients. I explain what the account actually does.”

The discussion circles back to 2026 realities:

• Enhanced ACA subsidies are gone

• Income cliffs are back

• Healthcare is the largest hidden tax increase most people will face

HSAs and dependent care FSAs offer:

• Real tax leverage

• Legal, IRS-approved savings

• Flexibility when premiums spike

Tom emphasizes:

• HR departments rarely explain these accounts properly

• Employees are left confused

• Poor decisions follow

ClaimLinx fills the gap:

• Educating employers

• Educating employees

• Walking people through setup step-by-step

Tom:

“If you want people to pay more, let HR run your health benefits.”

🔍 Key Topics & Insights1. What Is an FSA (Flexible Spending Account)?2. The Big Difference Between FSA and HSAFeatureFSAHSAOwnershipEmployer-sponsoredEmployee-ownedRollover❌ No✅ YesUse-it-or-lose-it✅ Yes❌ NoContribution flexibilityLimitedHighLong-term valueLowVery High3.