Can You Sign Up for FSA Without Health Insurance?

Flexible Spending Accounts (FSAs) are tax-advantaged financial tools. They allow individuals to set aside pre-tax money from their paychecks to cover eligible out-of-pocket healthcare or dependent care expenses. FSAs reduce taxable income and are typically offered through an employer.

Understanding Flexible Spending Accounts

Flexible Spending Accounts are employer-sponsored benefits that enable employees to contribute pre-tax dollars for eligible expenses. There are two primary types: Health Flexible Spending Accounts (Health FSAs) and Dependent Care Flexible Spending Accounts (DCFSAs). A Health FSA covers medical, dental, and vision expenses not covered by insurance, such as deductibles, co-payments, and prescription medications. The Internal Revenue Service (IRS) sets annual limits; for 2025, the maximum employee contribution to a Health FSA is $3,300.

A Dependent Care FSA helps cover expenses for qualifying dependents so the account holder, and their spouse if applicable, can work or seek employment. This includes costs for daycare, preschool, and before- or after-school care for children under 13, or care for a disabled spouse or dependent of any age. The IRS limits for DCFSAs for 2025 are $5,000 for individuals or married couples filing jointly, and $2,500 for married individuals filing separately. Both FSA types have a “use-it-or-lose-it” rule, meaning funds generally must be spent by the end of the plan year or they are forfeited. However, employers may offer a grace period of up to 2.5 months or allow a limited carryover amount for Health FSAs, such as up to $660 for the 2025 plan year, to mitigate this rule.

Eligibility for Health FSAs

Eligibility for a Health FSA is linked to employment and the benefits program offered by an employer. These accounts are not standalone benefits that an individual can procure independently. To participate, one must be an employee of a company that provides this benefit. While the FSA itself is not a form of health insurance, its availability is often contingent upon the employee’s enrollment in the employer’s group health plan.

Many employers offering Health FSAs require participants to be enrolled in their sponsored health insurance plan. Therefore, if an individual is not employed by a company offering a Health FSA, they cannot sign up for one. If an employer offers a Health FSA but requires enrollment in their group health plan, and an employee chooses not to enroll, they would be ineligible.

Eligibility for Dependent Care FSAs

Eligibility for a Dependent Care FSA operates under different criteria compared to a Health FSA, and notably, it is not dependent on possessing health insurance. The primary requirement for participating in a DCFSA is employment with a company that offers this specific benefit. Beyond employment, eligibility hinges on having qualifying dependents who require care while the account holder, and their spouse if married, are engaged in work or actively looking for work.

Qualifying dependents include children under the age of 13, or a spouse or other dependent of any age who is physically or mentally incapable of self-care and resides with the account holder for more than half the year. The expenses covered must be necessary for the adult(s) to be gainfully employed. Whether an individual has health insurance, or the type of health insurance they carry, bears no relevance to their eligibility for a Dependent Care FSA.

Enrolling in an FSA

Enrolling in an FSA typically occurs during an employer’s designated annual open enrollment period. This window is the primary opportunity for eligible employees to elect their contributions for the upcoming plan year. Individuals determine the total amount they wish to contribute for the year, up to the IRS-mandated limits, and this amount is then deducted in equal installments from their paychecks on a pre-tax basis.

Changes to the elected contribution amount outside of open enrollment are generally not permitted unless a qualifying life event (QLE) occurs. These events, defined by the IRS, include changes in marital status, birth or adoption of a child, changes in employment status for the employee or their spouse, or a significant change in dependent care costs or providers. Upon experiencing a QLE, employees typically have a limited timeframe, often 30 to 60 days, to adjust their FSA contributions. Funds from an FSA can be accessed through a provided debit card for direct payment or by submitting claims for reimbursement after eligible expenses have been incurred.