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What Exactly Is a Limited Purpose FSA?

What Exactly Is a Limited Purpose FSA?
Kevin Cleary

A Limited Purpose Flexible Spending Account may be right for you and Health Products For You can explain.

When it comes to health insurance plans, the choices can seem confusing and complicated. Between private insurance, Flexible Spending Accounts, Health Savings Accounts, High Deductible Savings Accounts, Medicare/Medicaid, navigating the healthcare landscape may seem like a daunting endeavor. I’m sure you have heard of a Flexible Spending Account, but a Limited Purpose FSA may not be commonly understood. What is it? Do I need one? How do I use it? These are all valid and I’m sure frequent questions surrounding a Limited Purpose FSA. We here at HPFY can explain what a Limited Purpose FSA actually is and how it may benefit you.

Limited Purpose FSA?

Hearing of a Limited Purpose FSA (LPFSA) may have people scratching their heads as to what this medical savings plan actually is. To complicate matters further, in order to enroll in a Limited Purpose FSA cannot be enrolled in a standard FSA, they are mutually exclusive. A Limited Purpose FSA works in a comparable way to a general FSA in that qualified medical expenses cover the employee, spouse, or eligible dependents. Where an FSA differs from a Limited Purpose FSA is that benefits are limited to dental and vision costs such as:

Eligible vision costs:

  • Dental expenses
  • Eye exams
  • Glasses
  • Dental exams
  • Teeth cleaning
  • Contact lenses

It is this limited portion of the FSA that does allow participants (employee or spouse) to participate in both a High Deductible Savings Account (HDSA) and/or a Health Savings Account (HSA). If your company/employer does not offer dental or vision benefits, a Limited Purpose FSA may be a great option to cover those costs (if available). In order 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 a dependent on someone else’s tax returns

Your employer should provide a plan packet that explains all eligible qualified medical expenses 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:

  • 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
  • Run Out Period-Set amount of time at the end of the plan where employees can submit claims

The IRS has increased FSA/HSA contribution limits, and they are:




FSA Contribution 



FSA Carryover 



HSA Contribution (single)






Your healthcare plan options are plentiful. The key to enrolling in the proper plan is to try and forecast what your healthcare needs for you, your spouse, or dependents may need for the following year. Don’t be afraid to ask your employer or Human Resources (HR) questions about any plan benefits that may benefit you.


Disclaimer: All content found on our website, including images, videos, infographics, and text were created solely for informational purposes. Our reviewed content should never be used for the purpose of diagnosis or treatment of any medical conditions. Content shared on our websites is not meant to be used as a substitute for advice from a certified medical professional. Reliance on the information provided on our website as a basis for patient treatment is solely at your own risk. We urge all our customers to always consult a physician or a certified medical professional before trying or using a new medical product.


HPFY Kevin Cleary

Kevin Cleary

Kevin Cleary has been a Health Products For You contributor for many years and has a degree in marketing. His health and wellness journey has a very personal meaning and has guided him in his content writing for HPFY.

In 2006, ...

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