A limited-purpose health FSA is much like a general-purpose health FSA. The main difference is that the limited-purpose account is set up to reimburse only eligible FSA dental and vision expenses, such as:
Many employers offer limited-purpose FSAs for their employees who have health savings accounts (HSAs). That’s because IRS rules state that you cannot have both an HSA and general-purpose health FSA since both apply funds toward your medical expenses. A limited-purpose FSA allows you to continue to contribute to an HSA. You maximize your savings and tax benefits by restricting your FSA reimbursement to only vision and dental expenses.
Your annual limited-purpose health FSA contribution is available on the first day of the FSA plan year. But your total FSA election amount is deducted from your paycheck in equal amounts throughout the year.
Let’s say your limited-purpose health FSA election is $1,200 and your plan year begins on January 1. On the first day of the FSA plan year, that’s January 1, you can use $1,200 right away to pay for eligible FSA expenses. Then $100 will be deducted from your paycheck each month throughout the year.
Signing up for your limited-purpose health FSA is simple. A key first step is estimating your future dental and vision expenses. Think about expenses for your spouse and your qualifying children or relatives as well. Let us do the math for you — use our online savings calculator.
You may also be able to sign up if you have a change in status event and your employer’s FSA plan allows enrollment at a time other than open enrollment.
You’ll want to review your employer’s Summary Plan Description (SPD) to find out if your limited-purpose FSA plan includes any of these features:
According to IRS rules, you lose the funds remaining in your FSA if they’re not applied to a carryover or used during the grace period. Learn more on our Additional FSA Features page.
With the exception of limiting reimbursement to dental and vision expenses, your limited-purpose FSA follows the same guidelines as a health FSA. Learn more on our Health FSA Participant Guidelines page.