A limited-purpose health flexible spending account (referred to as a limited-purpose FSA) is much like a typical, general-purpose health FSA; however, under a limited-purpose FSA, eligible expenses are limited to qualifying dental and vision expenses.
Per IRS regulations, you may not contribute to a health savings account (HSA) if you are covered by any non-qualifying health plan, including a general-purpose health FSA. By limiting FSA reimbursements to dental and vision care expenses, you (or your spouse) remain eligible to participate in both a limited-purpose FSA and an HSA. Participating in both plans allows you to maximize your savings and tax benefits.
An HSA is a personal savings account established through a custodian or trustee that can be used primarily for reimbursement of “eligible medical expenses” incurred by you (the account beneficiary) and your eligible dependent(s), as set forth in Tax Code Section 223.
An HSA is administered by an HSA custodian, trustee, or its designee. The terms of an HSA are set forth in the HSA custodial or trust agreement. Please note that HSAs are not an employer-sponsored employee plan.
You must meet the following requirements to be an “eligible individual” and qualify for an HSA:
A limited-purpose FSA covers qualified out-of-pocket expenses for dental and/or vision care provided to you, your spouse, or dependent(s). Typical eligible expenses include:
Qualified Dental Expenses
Qualified Vision Expenses
Check out our Eligible Expenses page for more details.
Expenses not eligible for reimbursement under a limited-purpose FSA include (but are not limited to):
These are only a few of the examples of expenses that aren’t covered by a limited-purpose FSA. Find a full list of eligible and ineligible expenses on our Eligible Expenses page.
Expenses reimbursed under your limited-purpose FSA may not be reimbursed under any other plan or program, including your HSA. If an expense is eligible under both your limited-purpose FSA and HSA, you may submit the expense for reimbursement under either account. However, the expense may not be submitted for reimbursement under both accounts – there’s “no double-dipping.”
The amount you can put in your FSA is called an “annual election.” Your employer decides the maximum election amount for your FSA plan each plan year. You can find out how much you can put into your health FSA by reading your enrollment materials or Summary Plan Description (SPD).
Your entire health FSA election is available on the first day of the plan year. If your FSA is active, your full annual election amount decreases as you submit your reimbursement requests. You can find out your available funds by logging in to your online account.
Your employer chooses the reimbursement schedule. You can find out how often reimbursements are made by reading the Summary Plan Description.
Just log in to your online account to find it.
You must submit a completed and signed Request for Reimbursement Form. Your signed and dated form should be sent along with one of the following:
In some cases, a Medical Determination Form completed by a doctor is required. Credit card receipts, canceled checks, and balance forward statements do not meet the requirements for acceptable documentation.
Your FSA information is available any time day or night by logging in to your online account.
It depends on the rules for your employer’s FSA. With some FSAs, you can spend the money until the last day of the plan year. After that date, you forfeit any money left in the account. But some employers give more time to use the FSA funds after the plan year ends.
Even if you have a run-out period or grace period, it’s important to plan carefully when you decide how much to put in your FSA. Don’t think of the grace period as an extension of the plan year. It’s more like a cushion in case your expenses fall a little short of what you expected. Find more information on our Run-out and Grace Period page.
Not all plans include a run-out period or grace period, and the length of time can vary. For more details about the deadlines for your employer’s FSA and when you can file claims, check your Summary Plan Description.
Your election can’t be changed during the plan year unless you have a change in status or other qualified event – that’s an event defined by IRS rules – and your employer's plan must allow the change as well. Learn more on our Health FSA Participant Guidelines page.
The IRS created the "use-it-or-lose-it" rule. It requires that all money you put into your FSA must be used to reimburse qualified expenses incurred during that plan year. Funds that are left over after the plan year ends are forfeited. The unused portion of your health FSA cannot be paid to you in cash or other benefits, and you can’t transfer money between FSAs. To reduce the risk of losing money at the end of your plan year, carefully estimate your expenses when choosing your annual election amount.
If you stop working for your employer or you lose your FSA eligibility, your plan participation and your pre-tax contributions will end automatically. Expenses for services you have after your termination date are not eligible for reimbursement.
Please Note: You may be entitled to elect COBRA continuation coverage under the health FSA and receive reimbursement for qualified expenses incurred after your termination, but only if you continue to make the required FSA COBRA premium payment using your money after taxes have been taken out. However, you generally do not have the right to elect COBRA continuation coverage if the cost of COBRA continuation coverage for the remainder of the plan year equals or is more than the amount left in your FSA. Please see your Summary Plan Description for specific rules that apply to your FSA plan.
You are not disqualified from establishing or contributing to an HSA just because you are a participant in a limited-purpose FSA with a grace period, as long as you have a zero balance on the last day of the plan year. However, if you do not deplete your general-purpose health FSA account balance prior to the end of the plan year, you will remain ineligible for the HSA until the first day of the month following the end of the grace period.
For details concerning your rights and responsibilities with respect to your HSA (including information concerning the terms of eligibility, qualifying high deductible health plans, contributions to an HSA, and distributions from an HSA), please refer to your HSA custodial agreement and/or the HSA communication material provided by your HSA trustee/custodian.