An FSA or Flexible Spending Account allows employees to set aside pre-tax dollars to spend on eligible expenses.  For a healthcare FSA, these expenses include medical, dental, and vision expenses for themselves and their dependents.  FSAs are generally “use-it-or-lose-it,” so it is important to be thoughtful when determining how much to put aside.  Employees cannot enroll in this program if they are contributing to or receiving contributions in a health savings account (HSA).

There are various types of FSAs in addition to a healthcare FSA, such as:

  • A Limited Purpose FSA (LPFSA): A type of flexible spending account that allows employees to set aside pre-tax dollars for dental and vision expenses for employees and their dependents. This limited FSA is compatible with enrollment in a High-Deductible Health Plan and contributions to an HSA.
  • A Dependent Care FSA (DCFSA): A type of flexible spending account that allows employees to set aside pre-tax dollars for dependent care expenses, such as daycare, preschool, and adult daycare. Like traditional FSAs, DCFSAs are generally use-it-or-lose-it, so it’s important to be thoughtful when determining how much to put aside.

An employee who chooses to participate can contribute the following amounts during the 2025 plan year through payroll deductions:

  • A Healthcare FSA: up to $3,300 maximum
  • A Limited Purpose FSA (LPFSA): up to $3,300 maximum
  • A Dependent Care FSA (DCFSA): up to $5,000 maximum per household for taxpayers who file either married filing jointly or head of household, or $2,500 for those taxpayers filing married filing separately.

If you have an FSA, it’s important to know what expenses are eligible for reimbursement.  Some of the eligible expenses for healthcare that you can use your FSA to pay for are:

  • Medical services
  • Prescriptions medications
  • Over-the-counter medications (prescribed by doctor)
  • Medical devices and equipment
  • Vision care expenses

Some expenses that are not eligible for an FSA reimbursement are:

  • Cosmetic procedures
  • Over-the-counter medications (not prescribed by doctor)
  • Health club memberships
  • Vitamins and Supplements (not prescribed by doctor)

There are several advantages to enrolling in an FSA:

  • Tax Savings: you pay less in federal income tax, social security tax and medicare tax.
  • Cost savings: you can save money on out-of-pocket costs such as deductibles, copays and coinsurance.
  • Budgeting: you can avoid unexpected expenses and plan for your healthcare cost in advance.
  • Convenience: you can pay for eligible healthcare expenses using a debit card linked to your account.

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