What is a Limited Purpose FSA?
A Limited Purpose FSA (LPFSA) is a pre-tax benefit available to employees who are enrolled in a qualified High Deductible Health Plan (HDHP) with a Health Savings Account (HSA). An LPFSA allows you to set pre-tax money aside to pay for dental and vision expenses for yourself and your dependents.
Who is eligible?
If offered by your employer, you are eligible for this benefit. Generally LPFSA's are elected by individuals enrolled in an HDHP.
How are LPFSAs funded?
These are front-loaded accounts, meaning that your entire annual election is available for use on the effective date of your plan. Deductions will be taken from your regular paychecks for this benefit over the course of the plan year.
Can I change the amount I contribute to my LPFSA?
LPFSA holders can only change their contributions during open enrollment or if you experience a Qualifying Life Event (QLE) during the plan year.
How long do I have to spend my LPFSA funds?
Normally, you lose any unspent money at the end of the plan year. However, your employer might offer certain features with your LPFSA to help you not lose any money:
- If your employer offers a run-out period, you have a specified amount of time after the end of the previous plan year to file claims for expenses incurred in the previous plan year (for example, you could file a claim in 2024 to use 2023 money on a doctor’s visit in 2023.)
- If your employer offers a grace period, you have up to 2.5 months after the end of the previous plan year to use unspent money on eligible medical expenses during the current plan year (for example, you could use 2023 money on a doctor’s visit in 2024.)
- If your employer offers a carryover, up to a certain amount will automatically transfer to the next plan year. The amount that will roll over is up to your employer, but the IRS sets a maximum amount that can change every year.