USA Can an employer just roll their own FSA?

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A Health Flexible Spending Account (FSA), under IRC Section 105 and 106, allows an employer to set aside pre tax dollars for an employee to pay for certain medical expenses.
Effectively the employee would keep receipts and get reimbursed (by filling out a form) for out-of-pocket expenses that aren't covered by insurance (for example, annual deductibles, office co-payments, prescriptions, over-the-counter drugs etc) with tax free 'account'.
Each employees account would be kept on the employers books.
I see there are rules about how much can roll over etc.
By participating in a FSA, an employee's taxable income is reduced, which increases the percentage of pay they take home. This, of course, also reduces employer payroll tax liabilities.
While there are tons of HR companies online that will do this for the employer, my question is it legal for the employer to do a FSA in house? Or does the IRS require it to be done by a 3rd party?
Thanks in advance
 

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