What Exactly Is a Limited Purpose FSA?

Health Products for You explains why a Limited Purpose FSA may be right for you.

You have heard of a Flexible Spending Account, but a Limited Purpose FSA may not be commonly understood. What is it? Do you need one? How do you use it? These are all valid and frequent questions surrounding a Limited Purpose FSA. Here we explain what a Limited Purpose FSA is and how it may benefit you.

Limited Purpose FSA…Huh?

A Limited Purpose FSA (LPFSA) may have people scratching their heads; especially as a Limited Purpose FSA and a standard FSA are mutually exclusive – you can only be enrolled for one or the other.

A Limited Purpose FSA works similarly to a general FSA in that it covers qualified medical expenses on FSA eligible items for the employee, spouse, or eligible dependents.

The difference is that you can use a Limited Purpose FSA to pay ONLY for dental and vision costs. Some of these LP FSA eligible items include:

  • Eligible vision costs
  • Dental expenses
  • Eye exams
  • Glasses
  • Dental exams
  • Teeth cleaning
  • Contact lenses

Also, in terms of FSA vs HSA, a Limited Purpose FSA can be used with an HSA. HSA participants can participate in a Limited Purpose FSA plan - unlike general-purpose FSA participants who cannot.

Limited Purpose FSA also allows participation in a High Deductible Savings Account (HDSA).

Opting for a Limited Purpose FSA

If your employer does not offer dental or vision benefits, a Limited Purpose FSA may be a great option to cover those costs (if available). To take advantage of a Limited Purpose FSA an employee must be:

  • Enrolled in a High Deductible Health Plan (HDHP)
  • Covered only under an HDHP (even if enrolled in another plan)
  • Not covered by Medicare
  • Not be dependent on someone else’s tax returns

Your employer should provide a plan package that explains all eligible qualified medical expenses on Limited Purpose FSA eligible items for your plan. Once enrolled in an LPHSA, you will elect how much money gets conducted from your pretax income. Other features of a Limited Purpose FSA can include:

What are things an FSA can be used for?

  • The entire LPFSA election is available on day one of your plan year
  • Available funds decrease as claims are paid (if LPFSA is active)
  • Employer chooses reimbursement schedule
  • Employers can choose carryover or grace period
  • Standard carryover is $550
  • Run Out Period-Set amount of time at the end of the plan where employees can submit claims
  • Federal maximum contributions have been set at $2750 for 2020 and 2021.

Your healthcare plan options can be plentiful. The key to enrolling in the proper plan is to try and forecast what your healthcare needs for you, your spouse, or your dependents may need for the following year. Ask your employer or Human Resources (HR) questions about plan benefits that may benefit you.

Meanwhile, you can check out and buy from a huge variety of FSA eligible items at our FSA store


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