Benefits Plans - Flexible Spending Accounts: Health Care -
Maximize Your Tax Savings with an FSA

The main benefit of an FSA is the tax savings it offers. An FSA enables you to pay for out-of-pocket expenses with money you set aside before any taxes are taken out. Without and FSA, you would still pay for these expenses, but you would do so using money remaining in your paycheck after federal taxes are withheld as shown in the following example.

Annual Savings Example* With an FSA Without an FSA
If your annual taxable income is: $28,000 $28,000
And you deposit this annual amount pretax into a Health Care Flexible Spending Account: ($1,500) $0
Your taxable income is now: $26,500 $28,000
Subtract federal and Social Security taxes: ($9,447) ($9,982)
Subtract after-tax dollars spent on medical expenses without an FSA: $0 ($1,500)
Your real spendable income is: $17,053 $16,518
Your annual tax savings is: $535  $0

* Potential tax savings shown for demonstration only. Actual savings will vary based on your individual tax situation. Please consult a tax professional for more information.

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The University of Michigan in its sole discretion may modify, amend, or terminate the benefits provided with respect to any individual receiving benefits, including active employees, retirees, and their dependents. Although the university has elected to provide these benefits this year, no individual has a vested right to any of the benefits provided. Nothing in these materials gives any individual the right to continued benefits beyond the time the university modifies, amends, or terminates the benefit. Anyone seeking or accepting any of the benefits provided will be deemed to have accepted the terms of the benefits programs and the university's right to modify, amend or terminate them.