Which of the following is NOT a characteristic of Flexible Spending Accounts?

Flexible Spending Accounts (FSAs) are designed to help employees manage out-of-pocket healthcare expenses using pre-tax dollars. A key characteristic of FSAs is that they allow employees to contribute a portion of their earnings before taxes to cover qualified medical expenses.

The correct answer reflects that funds in an FSA typically do not carry over to the next year. This is important because any money left in the account at the end of the plan year is usually forfeited, which contrasts with some health savings accounts or other arrangements that permit funds to roll over.

The pre-tax withdrawal characteristic allows employees to lower their taxable income by setting aside money for future healthcare costs. The option for high medical expense planning refers to the ability to use the account for various anticipated medical expenses, which can be beneficial for employees expecting high healthcare costs. Additionally, careful calculation of expected expenses is crucial because contribution limits and the use-it-or-lose-it rule require employees to be strategic about how much they deposit into the account to avoid losing unspent funds. Thus, the ability to carry over funds is distinctly not characteristic of FSAs, making the identification of this option correct in the context of the question.