Which of the following statements about Flexible Spending Accounts is correct?

Flexible Spending Accounts (FSAs) are designed to provide employees with tax advantages for specific medical and dependent care expenses. The correct statement highlights that FSAs enable individuals to save and spend money tax-free on qualified expenses, such as certain medical costs or dependent care. This tax-free aspect is a significant benefit, as it effectively allows employees to reduce their taxable income by the amount they contribute to the FSA, leading to potential tax savings when they withdraw these funds for eligible expenses.

The other statements do not accurately reflect the nature of FSAs. For instance, unused funds in an FSA typically do not carry over to the next year; instead, they may be forfeited at the end of the plan year unless a grace period or a limited rollover option is provided by the employer. Additionally, FSAs do not offer the flexibility to be used for any type of expense; they are restricted to approved medical expenses and dependent care costs. Lastly, participation in FSAs is not mandatory for all employees; it is an optional benefit that employers may offer, and employees can choose whether or not to enroll.