Georgia Life and Health Insurance Practice Exam

The primary purpose of a Flexible Spending Account (FSA) is to provide tax-free health care benefits. FSAs are designed to allow employees to set aside a portion of their earnings to pay for qualified medical expenses not covered by their health insurance. By contributing pre-tax dollars, employees can lower their taxable income, which ultimately leads to savings on their overall tax bill. This pre-tax contribution aspect makes FSAs particularly valuable for covering out-of-pocket health care costs such as copayments, deductibles, and certain medical supplies.

The key distinguishing factor for an FSA compared to other options is its focus on health care expenses, emphasizing the tax advantages available when using the funds for qualified health-related expenditures. Other choices do not align with the purpose of an FSA, as they relate to retirement, education, or life insurance, which fall outside the scope of what FSAs are intended to address.