What are the two types of flexible spending accounts?

The two types of flexible spending accounts are indeed the Health Care Accounts and Dependent Care Accounts. Health Care Accounts are designed to allow employees to set aside pre-tax dollars to pay for out-of-pocket medical expenses, such as copayments, prescription medications, and certain medical devices. This type of account helps to reduce taxable income and can be used for a variety of health-related expenses within a specific plan year.

Dependent Care Accounts, on the other hand, are used to pay for eligible dependent care services, providing financial assistance for childcare while a parent or guardian is at work or attending school. This account is also funded with pre-tax dollars, allowing employees to save money on taxes while covering essential childcare costs.

These two types operate under flexible spending account arrangements, making it easier for employees to budget for medical and dependent care expenses effectively. Each has distinct eligibility requirements and allowable expenses, yet they both share the benefit of being funded with pre-tax contributions.