Flexible Spending Accounts

[mvanlaan]

We allow our staff to deduct a designated amount of their pay into a Flexible Spending Account (used for medical expenses). This is a pre-tax deduction. I assume we would set this up as a Pay Item (Other Deductions?) and we would close it to a Liability Account?

Does anyone have experience with this?

[JohnDMeyers]

If the Flexible Spending Account is held by an entity outside the church, and you write a check to them, then it sounds like you have it set up correctly.

Your Pay Item would look like this:
DB 01-1110-000 checking $50
CR 01-2120-000 Flex liability $50

When you transfer the check to the savings plan:
CR 01-1110-000 checking $50
DB 01-2120-000 Flex liability $50

The term "close it to a liability account" doesn't really apply. Income and Expense accounts "close-to" an Equity account, but Liability and Asset accounts do not. Maybe "transfer to a liability account" is a better way to say it.

[mvanlaan]

Thanks, John. Makes sense.